DEFM14A
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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 Pursuant to §240.14a-12

Zymergen 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 all boxes that apply):

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


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LOGO   LOGO
PROXY STATEMENT OF ZYMERGEN INC.   PROSPECTUS OF GINKGO BIOWORKS HOLDINGS, INC.

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

Dear Zymergen Stockholders:

You are cordially invited to attend a special meeting of the stockholders of Zymergen Inc., a Delaware public benefit corporation (“Zymergen”), which will be held at 11:00 a.m. Pacific Daylight Time, on October 17, 2022. In light of the continuing effects of the coronavirus/COVID-19 outbreak and in the best interests of public health and the health and safety of the board of directors of Zymergen (the “Zymergen Board”), employees and stockholders, Zymergen is holding a virtual-only meeting (the “Special Meeting”). Stockholders can attend the meeting via the Internet at www.virtualshareholdermeeting.com/ZY2022SM by using the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

As previously announced, Zymergen, Ginkgo Bioworks Holdings, Inc., a Delaware corporation (“Ginkgo”), and Pepper Merger Subsidiary Inc., a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of July 24, 2022 (the “Merger Agreement”), pursuant to which, among other things, Merger Sub will merge with and into Zymergen, with Zymergen continuing as the surviving corporation (the “Merger”). The Zymergen Board and the board of directors of Ginkgo each unanimously approved the Merger Agreement and related transactions.

If the Merger is completed, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.001, of Zymergen (“Zymergen Common Stock”) that is issued and outstanding immediately prior to the Effective Time will be automatically cancelled and converted into the right to receive a number of shares of Class A common stock, par value $0.0001, of Ginkgo (“Ginkgo Class A Common Stock”) equal to the product of the number of shares of Zymergen Common Stock multiplied by 0.9179 (the “Exchange Ratio”). The Exchange Ratio is fixed and will not be adjusted to reflect changes in the price of Zymergen Common Stock or Ginkgo Class A Common Stock prior to the closing of the Merger. No fractional shares will be issued in the Merger. Instead, Zymergen stockholders will receive cash in lieu of any fractional shares. Based on the estimated number of shares of Zymergen Common Stock and Ginkgo Class A Common Stock outstanding on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, Zymergen and Ginkgo estimate that, upon completion of the Merger, former Zymergen stockholders and certain other Zymergen equityholders will own approximately 5.25% of Ginkgo on a fully diluted basis, determined using the treasury stock method.

At the Special Meeting, Zymergen stockholders will be asked to vote on proposals to (i) adopt the Merger Agreement (the “Merger Proposal”) and (ii) approve adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies if sufficient votes to approve the Merger Proposal have not been obtained by Zymergen (the “Adjournment Proposal”). Information about the Special Meeting, the Merger and other related business to be considered by Zymergen stockholders at the Special Meeting is included in the accompanying proxy statement/prospectus. We urge all Zymergen stockholders to read the accompanying proxy statement/prospectus, including the annexes. In particular, we urge you to read carefully “Risk Factorsbeginning on page 24 of the accompanying proxy statement/prospectus.

Your vote is very important regardless of the number of shares of Zymergen Common Stock that you own. The Merger cannot be completed without the approval of the Merger Proposal by the affirmative vote of a majority of the outstanding shares of Zymergen Common Stock.


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Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in the accompanying proxy statement/prospectus to make sure that your shares are represented at the Special Meeting. If you are a Zymergen stockholder of record and you do not submit a valid proxy or attend the virtual Special Meeting to vote your shares of Zymergen Common Stock in person, abstentions will have the the same effect as a vote against Merger Proposal and the Adjournment Proposal. If you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares on the Merger Proposal, it will have the same effect as (1) a vote against the Merger Proposal and (2) no effect on the Adjournment Proposal. The Zymergen Board unanimously recommends that you vote “FOR” the Merger Proposal and “FOR” the Adjournment Proposal.

Shares of Zymergen Common Stock are listed on the Nasdaq Global Market under the symbol “ZY.” Shares of Ginkgo Class A Common Stock are listed on the New York Stock Exchange under the symbol “DNA.” We urge you to obtain current market quotations for shares of Zymergen Common Stock and Ginkgo Class A Common Stock.

We appreciate your continued support and interest in Zymergen.

 

LOGO
Jay Flatley
Chairman and Acting Chief Executive Officer
Zymergen Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger or the other transactions described in the accompanying proxy statement/prospectus or the securities to be issued in connection with the Merger or determined if the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated September 14, 2022 and is first being mailed to Zymergen stockholders on or about September 14, 2022.


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LOGO

Zymergen Inc.

5959 Horton Street, Suite 700

Emeryville, CA 94608

Notice of Special Meeting of Stockholders to be Held on October 17, 2022

Dear Zymergen stockholders:

We are pleased to invite you to attend the special meeting of the stockholders of Zymergen Inc., a Delaware public benefit corporation (“Zymergen”), which will be held on October 17, 2022, at 11:00 a.m. Pacific Daylight Time (the “Special Meeting”). You will be able to attend via the Internet at www.virtualshareholdermeeting.com/ZY2022SM by using the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials. We are holding the Special Meeting for the following purposes:

 

   

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated July 24, 2022 (the “Merger Agreement”), by and among Zymergen, Ginkgo Bioworks Holdings, Inc., a Delaware corporation (“Ginkgo”), and Pepper Merger Subsidiary Inc. a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo (“Merger Sub”), as such agreement may be amended from time to time (the “Merger Proposal”). A copy of the Merger Agreement is attached as Annex A to the proxy statement/prospectus accompanying this notice; and

 

   

To consider and vote on a proposal to approve adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies if sufficient votes to approve the Merger Proposal have not been obtained by Zymergen (the “Adjournment Proposal”).

Approval of the Merger Proposal is required for completion of the Merger. The Adjournment Proposal is not a condition to the obligations of Zymergen or Ginkgo to complete the Merger.

Zymergen will transact no other business at the Special Meeting except for the proposals set forth above. Please refer to the attached proxy statement/prospectus for further information with respect to the business to be transacted at the Special Meeting.

At a meeting of the board of directors of Zymergen (the “Zymergen Board”) held on July 23, 2022, the Zymergen Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen; (ii) declared it advisable to enter into the 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 Merger Agreement by Zymergen, the performance by Zymergen of its covenants and other obligations under the Merger Agreement, and the consummation of the transactions contemplated thereby, 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 therein was authorized and approved in accordance with the requirements of the General Corporation Law of the State of Delaware (the “DGCL”); and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.

The Zymergen Board recommends that Zymergen stockholders vote “FOR” the Merger Proposal and “FOR” the Adjournment Proposal.

The Zymergen Board has set August 31, 2022 as the record date (the “Record Date”) for the Special Meeting. Only holders of record of shares of Zymergen common stock, par value $0.001 (“Zymergen Common Stock”), at the close of business on the Record Date are entitled to notice of, and to vote at, the Special Meeting


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and any adjournment thereof. A list of Zymergen stockholders entitled to vote at the Special Meeting will be available for inspection at Zymergen’s principal executive offices, located at 5959 Horton Street, Suite 700, Emeryville, CA 94608, at least 10 days prior to the date of the Special Meeting for any purpose germane to the Special Meeting during ordinary business hours. The list will also be available during the Special Meeting for inspection by any Zymergen stockholder through the meeting website at www.virtualshareholdermeeting.com/ZY2022SM.

Approval of the Merger Proposal requires the affirmative vote of the majority of the outstanding shares of Zymergen Common Stock. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of Zymergen Common Stock present at the virtual Special Meeting in person, by remote communication, if applicable, or by proxy. If you are a Zymergen stockholder of record, abstentions will have the same effect as (1) a vote against the Merger Proposal and (2) no effect on the Adjournment Proposal.

Your vote is important. Whether or not you expect to attend the Special Meeting, we urge you to submit a proxy as promptly as possible to instruct the voting of your shares of Zymergen Common Stock by proxy over the telephone or through the Internet, or by completing, dating, signing and returning a proxy that Zymergen may mail to you as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. Even if you have voted by proxy, you may still vote at the virtual meeting. Please note, however, that if your shares are held through a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from your broker, bank or other nominee.

 

By Order of the Board of Directors,
LOGO
Jay Flatley
Chairman and Acting Chief Executive Officer
Zymergen Inc.

September 14, 2022

Emeryville, CA

PLEASE FOLLOW THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND SUBMIT YOUR PROXY PROMPTLY. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT SUBMITTING A PROXY FOR YOUR SHARES OF ZYMERGEN COMMON STOCK, YOU SHOULD CONTACT MACKENZIE PARTNERS, INC., ZYMERGEN’S PROXY SOLICITOR. ZYMERGEN STOCKHOLDERS PLEASE CALL TOLL-FREE AT 1-800-322-2885.

 

Stockholders can attend the meeting via the Internet at www.virtualshareholdermeeting.com/ZY2022SM by using the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the United States Securities and Exchange Commission (the “SEC”) by Ginkgo Bioworks Holdings, Inc. (“Ginkgo”) (File No. 333-267241), constitutes a prospectus of Ginkgo under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Ginkgo Class A Common Stock to be issued to Zymergen Inc. (“Zymergen”) stockholders pursuant to the Merger Agreement. This document also constitutes a notice of meeting and proxy statement of Zymergen under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Ginkgo has supplied all information contained in this proxy statement/prospectus relating to Ginkgo. Zymergen has supplied all information contained in or incorporated by reference into this proxy statement/prospectus relating to Zymergen. Ginkgo and Zymergen have both contributed to information relating to the Merger.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus is dated September 14, 2022, and is based on information as of that date or such other date as may be noted. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any other date. You should not assume that the information contained in any document incorporated or deemed to be incorporated by reference herein is accurate as of any date other than the date of such document. Any statement contained in a document incorporated or deemed to be incorporated by reference into this proxy statement/prospectus will be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference into this proxy statement/prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement/prospectus. Neither the mailing of this proxy statement/prospectus to the Zymergen stockholders nor the taking of any actions contemplated hereby by Ginkgo or Zymergen at any time will create any implication to the contrary.

Unless otherwise indicated or as the context otherwise requires, all references in this proxy statement/prospectus to:

 

   

“Adjournment Proposal” refers to the proposal to approve adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies if sufficient votes to approve the Merger Proposal have not been obtained by Zymergen;

 

   

“Allen & Company” refers to Allen & Company LLC, financial advisor to Ginkgo;

 

   

“Closing Date” refers to the date on which the consummation of the Merger actually occurs;

 

   

“Code” refers to the Internal Revenue Code of 1986, as amended;

 

   

“COVID-19” refers to SARS-CoV-2 or COVID-19, and any evolutions, variations or mutations thereof or related or associated epidemics, pandemic or disease outbreaks;

 

   

“Cowen” refers to Cowen and Company, LLC, financial advisor to Zymergen;

 

   

“DCVC” refers to Data Collective II, L.P. and certain of its affiliates that are stockholders of Zymergen;

 

   

“DGCL” refers to the General Corporation Law of the State of Delaware;

 

   

“DOJ” refers to the United States Department of Justice;

 

   

“Effective Time” refers to the filing of the certificate of merger with the Secretary of State of the State of Delaware or such later date and time as Zymergen and Ginkgo may agree upon and as is set forth in such certificate of merger;

 

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“ESPP” means Zymergen’s 2021 Employee Stock Purchase Plan;

 

   

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

 

   

“Exchange Ratio” refers to 0.9179 of a share of Ginkgo Class A Common Stock for each share of Zymergen Common Stock issued and outstanding immediately prior to the Closing Date (other than certain excluded shares specified in the Merger Agreement);

 

   

“FDA” means the United States Food and Drug Administration;

 

   

“Freshfields” refers to Freshfields Bruckhaus Deringer US LLP, legal counsel to Zymergen;

 

   

“FTC” refers to the United States Federal Trade Commission;

 

   

“GAAP” refers to generally accepted accounting principles, consistently applied, in the United States;

 

   

“Ginkgo” refers to Ginkgo Bioworks Holdings, Inc. a Delaware corporation;

 

   

“Ginkgo Board” refers to the Board of Directors of Ginkgo;

 

   

“Ginkgo Bylaws” refers to the Bylaws of Ginkgo, as may be amended;

 

   

“Ginkgo Charter” refers to the Certificate of Incorporation of Ginkgo, as may be amended;

 

   

“Ginkgo Class A Common Stock” refers to the Class A common stock, par value $0.0001 per share, of Ginkgo;

 

   

“Ginkgo Class B Common Stock” refers to the Class B common stock, par value $0.0001 per share, of Ginkgo;

 

   

“Ginkgo Class C Common Stock” refers to the Class C common stock, par value $0.0001 per share, of Ginkgo;

 

   

“Ginkgo 2021 Plan” refers to Ginkgo Bioworks Holdings, Inc.’s 2021 Incentive Award Plan;

 

   

“Ginkgo Trading Price” refers to the volume weighted average of the trading prices, rounded to four decimal points, of Ginkgo Class A Common Stock on the NYSE during normal trading hours (as reported on Bloomberg L.P. under the function “VWAP”) for the five consecutive trading days ended on (and including) the trading day that is two full trading days prior to the Closing Date;

 

   

“HSR Act” refers to the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

 

   

“IRS” refers to the United States Internal Revenue Service;

 

   

“Merger” refers to the merger of Merger Sub with and into Zymergen, with Zymergen continuing as the Surviving Corporation;

 

   

“Merger Agreement” refers to the Agreement and Plan of Merger, dated as of July 24, 2022, by and among Zymergen, Ginkgo and Merger Sub, a copy of which is attached as Annex A to this proxy statement/prospectus;

 

   

“Merger Consideration” refers to the consideration payable in the Merger by Ginkgo to Zymergen stockholders in respect of each share of Zymergen Common Stock and certain other Zymergen equity securities outstanding immediately prior to the Effective Time, which consideration is based on the Exchange Ratio;

 

   

Merger Consideration Value” refers to the amount (rounded down to the nearest whole cent) equal to the product of (i) the Merger Consideration and (ii) the Ginkgo Trading Price;

 

   

“Merger Proposal” refers to the proposal to adopt the Merger Agreement;

 

   

“Merger Sub” refers to Pepper Merger Subsidiary Inc., a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo;

 

   

“Nasdaq” refers to the Nasdaq Global Market;

 

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“NYSE” refers to the New York Stock Exchange;

 

   

“Option Consideration Value” with respect to any Zymergen Stock Option, refers to the amount, without interest, equal to the product of (i) the excess of (a) the Merger Consideration Value over (b) the exercise price per share of any such Zymergen Stock Option, and (ii) the total number of shares of Zymergen Common Stock issuable upon exercise in full of such Zymergen Stock Option;

 

   

“Pro Forma Balance Sheet” refers to Ginkgo’s unaudited pro forma condensed combined balance sheet after giving effect to the Merger;

 

   

“Pro Forma Financial Statements” refers to Ginkgo’s unaudited pro forma condensed combined financial statements after giving effect to the Merger;

 

   

“Pro Forma Statements of Operations” refers to Ginkgo’s unaudited pro forma condensed combined statements of operations after giving effect to the Merger;

 

   

“Record Date” refers to August 31, 2022, the date on which holders of Zymergen Common Stock must be holders of record in order to receive notice of, and to vote at, the Special Meeting;

 

   

“Ropes & Gray” refers to Ropes & Gray LLP, legal counsel to Ginkgo;

 

   

“SEC” refers to the United States Securities and Exchange Commission;

 

   

“Securities Act” refers to the Securities Act of 1933, as amended;

 

   

“Special Meeting” refers to the meeting of Zymergen stockholders to be held at 11:00 a.m. (Pacific Daylight Time), on October 17, 2022, via the Internet at www.virtualshareholdermeeting.com/ZY2022SM;

 

   

“Surviving Corporation” refers to Zymergen as the surviving corporation following the Merger;

 

   

“SoftBank” refers to SVF Excalibur (Cayman) Limited;

 

   

“Termination Date” refers to 11:59 p.m., New York City time, on January 24, 2023, which date may be extended by either party by three months up to two times each if all of the closing conditions other than certain conditions related to receipt of regulatory approvals are satisfied or waived (or are capable of being satisfied at such time);

 

   

“True Ventures” refers to True Ventures IV, L.P. and certain of its affiliates that are stockholders of Zymergen;

 

   

“Voting Agreement Stockholders” refers to SoftBank, DCVC and True Ventures;

 

   

“Voting Agreements” refers to the voting agreements, dated as of July 24, 2022, entered into by and between Ginkgo and each of the Voting Agreement Stockholders;

 

   

“Zymergen” refers to Zymergen Inc., a Delaware public benefit corporation;

 

   

“Zymergen Board” refers to the Board of Directors of Zymergen;

 

   

“Zymergen Bylaws” refers to the Amended and Restated Bylaws of Zymergen, as may be amended;

 

   

“Zymergen Charter” refers to the Amended and Restated Certificate of Incorporation of Zymergen, as may be amended;

 

   

“Zymergen Common Stock” refers to the common stock, par value $0.001 per share, of Zymergen;

 

   

“Zymergen Stock Option” refers to any option to purchase shares of Zymergen Common Stock granted pursuant to the Zymergen Stock Plans;

 

   

“Zymergen RSUs” refers to restricted stock units granted pursuant to the Zymergen Stock Plans; and

 

   

“Zymergen Stock Plans” refers to Zymergen’s 2014 Stock Plan and 2021 Incentive Award Plan and each other Zymergen plan that provides for the award of rights of any kind to receive shares of Zymergen Common Stock or benefits measured in whole or in part by reference to shares of Zymergen Common Stock.

 

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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about Zymergen from documents Zymergen has filed or will file with the SEC that are not included in or delivered with this proxy statement/prospectus. For additional information on the documents incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference beginning on page 317 of this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone using the following contact information, or free of charge on the SEC website, www.sec.gov.

Zymergen Inc.

5959 Horton Street, Suite 700

Emeryville, CA

Attn: Investor Relations

(415) 801-8073

In addition, if you have questions about the Merger or this proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, or need to obtain proxy cards or other information related to the proxy solicitation, please call MacKenzie Partners, Inc., the proxy solicitor for Zymergen, toll-free at 1-800-322-2885. You will not be charged for any of these documents that you request.

You may also request a copy of this proxy statement/prospectus or other information concerning Ginkgo, without charge, by written or telephonic request directed to Ginkgo Bioworks Holdings, Inc., Attention: Investor Relations, 27 Drydock Avenue, 8th Floor, Boston MA 02210 Telephone: (877) 422-5362; or from the SEC through the SEC website mentioned above.

If you would like to request any documents, please do so no later than October 10, 2022, or the date that is five business days before the date of the Special Meeting, in order to receive timely delivery of such documents before the Special Meeting.

 

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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS

     1  

SUMMARY

     10  

COMPARATIVE MARKET PRICE INFORMATION

     23  

RISK FACTORS

     24  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     82  

THE COMPANIES

     83  

THE SPECIAL MEETING

     85  

BENEFICIAL STOCK OWNERSHIP OF GINKGO DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN HOLDERS OF GINKGO COMMON STOCK

     89  

BENEFICIAL STOCK OWNERSHIP OF ZYMERGEN DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN HOLDERS OF ZYMERGEN COMMON STOCK

     93  

PROPOSAL 1—ADOPTION OF THE MERGER AGREEMENT

     96  

PROPOSAL 2—ADJOURNMENTS OF THE SPECIAL MEETING

     97  

THE MERGER

     98  

Background of the Merger

     98  

Ginkgo’s Reasons for the Merger

     113  

Recommendation of the Zymergen Board and Zymergen’s Reasons for the Merger

     115  

Opinion of Financial Advisor to Zymergen

     121  

Certain Unaudited Prospective Financial Information of Zymergen

     129  

Interests of Zymergen’s Directors and Executive Officers in the Merger

     131  

Quantification of Potential Payments and Benefits to Zymergen’s Named Executive Officers in Connection with the Merger

     135  

Regulatory Approvals

     137  

Litigation Relating to the Merger

     138  

NYSE Listing of Ginkgo Class A Common Stock; De-Listing and Deregistration of Zymergen Common Stock After the Merger

     138  

Exchange of Shares of Zymergen Common Stock

     138  

Fractional Shares

     139  

No Appraisal Rights

     139  

Accounting Treatment of the Merger

     139  

THE MERGER AGREEMENT

     140  

The Merger

     140  

Effective Time; Closing

     140  

Merger Consideration

     141  

Treatment of Zymergen Stock Options, RSUs and ESPP Purchases

     141  

Withholding

     142  

Conditions to the Completion of the Merger

     142  

The Special Meeting

     145  

No Solicitation of Acquisition Proposals and Change of Recommendation

     146  

Efforts to Consummate the Merger; Regulatory Matters

     150  

Termination of the Merger Agreement

     152  

Termination Fees and Expenses

     153  

Conduct of Business Pending the Merger

     154  

Public Statements and Disclosure

     157  

Access to Information; Integration Planning

     157  

Additional Agreements

     158  

Governance of the Surviving Corporation

     159  

Directors’ and Officers’ Exculpation, Indemnification and Insurance

     160  

Employee Matters

     161  

Representations and Warranties

     162  

 

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Extension, Waiver and Amendment of the Merger Agreement

     163  

Transaction Litigation

     164  

Governing Law; Jurisdiction; Waiver of Jury Trial

     164  

Specific Performance

     164  

THE VOTING AGREEMENTS

     165  

INFORMATION ABOUT GINKGO

     166  

Description of Business of Ginkgo

     166  

Management’s Discussion and Analysis of Financial Conditions and Results of Operations of Ginkgo

     221  

Market Information, Stockholders and Dividends of Ginkgo

     251  

Management of Ginkgo

     253  

Executive and Director Compensation of Ginkgo

     259  

Certain Relationships and Related Party Transactions of Ginkgo

     266  

Description of Ginkgo’s Capital Stock

     271  

COMPARISON OF RIGHTS OF HOLDERS OF GINKGO CLASS A COMMON STOCK AND ZYMERGEN COMMON STOCK

     286  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     294  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     296  

LEGAL MATTERS

     314  

EXPERTS

     314  

HOUSEHOLDING

     314  

FUTURE STOCKHOLDER PROPOSALS

     315  

WHERE YOU CAN FIND MORE INFORMATION

     316  

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

     317  

INDEX TO FINANCIAL STATEMENTS OF GINKGO

     F-1  
ANNEX A—Agreement and Plan of Merger, dated as of July 24, 2022, by and among Ginkgo Bioworks Holdings, Inc., Pepper Merger Subsidiary Inc. and Zymergen Inc.      A-1  
ANNEX B—Voting Agreement, dated as of July 24, 2022, by and between Ginkgo Bioworks Holdings, Inc. and SVF Excalibur (Cayman) Limited      B-1  
ANNEX C—Voting Agreement, dated as of July 24, 2022, by and among Ginkgo Bioworks Holdings, Inc., Data Collective II, L.P. and DCVC Opportunity Fund, L.P.      C-1  
ANNEX D—Voting Agreement, dated as of July 24, 2022, by and among Ginkgo Bioworks Holdings, Inc., True Ventures IV, L.P. and certain of its affiliates      D-1  

ANNEX E—Opinion of Cowen and Company, LLC

     E-1  

 

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QUESTIONS AND ANSWERS

The following section provides brief answers to certain questions that you may have regarding the Special Meeting, Merger Agreement and the proposed Merger. Please note that this section does not address all issues that may be important to you as a Zymergen stockholder. Accordingly, you should carefully read this entire proxy statement/prospectus, including each of the Annexes, and the documents that have been incorporated by reference into this proxy statement/prospectus. See Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference” beginning on page 317 of this proxy statement/prospectus.

 

Q:

Why have I received this proxy statement/prospectus?

 

A:

You are receiving this proxy statement/prospectus because you were a stockholder of record of Zymergen on August 31, 2022, the Record Date for the Special Meeting. Ginkgo and Zymergen have agreed to the merger of Ginkgo and Zymergen in accordance with the Merger Agreement, pursuant to which, among other things, Merger Sub will be merged with and into Zymergen, with Zymergen continuing as the Surviving Corporation. See “The Merger Agreement” beginning on page 140 of this proxy statement/prospectus for more information. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A and incorporated herein by reference. Pursuant to the Merger Agreement, at the Effective Time, each issued and outstanding share of Zymergen Common Stock will be automatically cancelled and converted into the right to receive a number of shares of Ginkgo Class A Common Stock equal to the product of the number of shares of Zymergen Common Stock multiplied by the Exchange Ratio, with cash paid in lieu of fractional shares, without interest.

This proxy statement/prospectus serves as the proxy statement through which Zymergen will provide its stockholders with important information regarding the Special Meeting, the Merger and the other transactions contemplated by the Merger Agreement and to solicit proxies to obtain the necessary stockholder approvals for approval of the Merger Proposal and approval of the other proposal described herein. It also serves as the prospectus by which Ginkgo will offer and issue shares of Ginkgo Class A Common Stock as Merger Consideration.

The Merger cannot be completed unless, among other things, Zymergen stockholders approve the Merger Proposal. Zymergen is holding a virtual Special Meeting to be held on October 17, 2022 to obtain such approval.

 

Q:

What will I receive for my shares of Zymergen Common Stock in the Merger?

 

A:

In the Merger, each issued and outstanding share of Zymergen Common Stock immediately prior to the Effective Time will be automatically cancelled and converted into the right to receive a number of shares of Ginkgo Class A Common Stock equal to the product of the number of shares of Zymergen Common Stock multiplied by the Exchange Ratio, with cash paid in lieu of fractional shares, without interest.

After the consummation of the Merger, Zymergen stockholders will own shares of Ginkgo Class A Common Stock and will no longer own shares of Zymergen Common Stock. See “The Merger Agreement” beginning on page 140 of this proxy statement/prospectus.

 

Q:

How will I receive the Merger Consideration to which I am entitled?

 

A:

After receiving the proper documentation from you, following the Effective Time of the Merger, the exchange agent will forward to you the Ginkgo Class A Common Stock and any cash in lieu of fractional shares to which you are entitled. For additional information about the exchange of shares of Ginkgo Class A Common Stock for shares of Zymergen Common Stock, see “The Merger—Exchange of Shares of Zymergen Common Stock beginning on page 138 of this proxy statement/prospectus.

 

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Q:

What is the value of the Merger Consideration?

 

A:

The value of the Merger Consideration may fluctuate between the date of this proxy statement/prospectus and the completion of the Merger based upon the market value of Ginkgo Class A Common Stock. In the Merger, Zymergen stockholders will receive the fixed amount of 0.9179 of a share of Ginkgo Class A Common Stock in exchange for each share of Zymergen Common Stock. Any fluctuation in the market price of Ginkgo Class A Common Stock after the date of this proxy statement/prospectus will change the value of the shares of Ginkgo Class A Common Stock that Zymergen stockholders will receive at the Effective Time of the Merger.

Based on the closing price of Ginkgo Class A Common Stock on the NYSE on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, the Exchange Ratio represented approximately $2.68 in value for each share of Zymergen Common Stock. Based on the closing price of Ginkgo Class A Common Stock on the NYSE on September 9, 2022, the last practicable trading day prior to the mailing of this proxy statement/prospectus, the Exchange Ratio represented approximately $2.70 in value for each share of Zymergen Common Stock. We urge you to obtain current market quotations of Ginkgo Class A Common Stock and Zymergen Common Stock.

 

Q:

Where will the shares of Ginkgo Class A Common Stock that I receive in the Merger be traded?

 

A:

Shares of Ginkgo Class A Common Stock are listed on the NYSE under the symbol “DNA.” Ginkgo will apply to have the new shares of Ginkgo Class A Common Stock issued in the Merger listed on the NYSE upon consummation of the Merger.

 

Q:

What percentage of Ginkgo Class A Common Stock will Zymergen stockholders own following the Merger?

 

A:

Based on the estimated number of shares of Zymergen Common Stock and Ginkgo Class A Common Stock outstanding on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, Zymergen and Ginkgo estimate that, upon completion of the Merger, former Zymergen stockholders and certain other Zymergen equityholders will own approximately 5.25% of Ginkgo on a fully diluted basis.

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will be held at 11:00 a.m. Pacific Daylight Time, on October 17, 2022 via the Internet at www.virtualshareholdermeeting.com/ZY2022SM. For additional information about the Special Meeting, see “The Special Meeting” beginning on page 85 of this proxy statement/prospectus.

 

Q:

What are the specific proposals on which I am being asked to vote at the Special Meeting?

 

A:

At the Special Meeting, Zymergen stockholders will be asked to vote on the following proposals:

 

   

Proposal 1—Merger Proposal. To adopt the Merger Agreement.

 

   

Proposal 2—Adjournment Proposal. To approve adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies if sufficient votes to approve the Merger Proposal have not been obtained by Zymergen.

 

Q:

How does the Zymergen Board recommend that Zymergen stockholders vote?

 

A:

At a meeting of the Zymergen Board held on July 23, 2022, the Zymergen Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen; (ii) declared it advisable to enter into the 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 Merger Agreement by Zymergen, the performance

 

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  by Zymergen of its covenants and other obligations under the Merger Agreement, and the consummation of the transactions contemplated thereby, 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 therein was authorized and approved in accordance with the requirements of the DGCL; and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.

The Zymergen Board unanimously recommends that you vote “FOR” each of the Merger Proposal and the Adjournment Proposal.

See “The Merger—Recommendation of the Zymergen Board and Reasons for the Merger” beginning on page 115 of this proxy statement/prospectus.

 

Q:

Are any Zymergen stockholders already committed to vote in favor of the proposals?

 

A:

Yes. Pursuant to the Voting Agreements, each Voting Agreement Stockholder (who collectively beneficially own, in the aggregate, approximately 40% of the issued and outstanding shares of Zymergen Common Stock as of July 22, 2022, the last trading day before the public announcement of the Merger Agreement) has agreed to vote the shares of Zymergen Common Stock beneficially owned and/or controlled by such Voting Agreement Stockholder in favor of, among other things, the adoption of the Merger Agreement. Such obligation necessarily requires that each Voting Agreement Stockholder vote in favor of the Merger Proposal. For more information, see “The Voting Agreements” beginning on page 165 of this proxy statement/prospectus.

 

Q:

What is a quorum for purposes of the Special Meeting?

 

A:

A quorum of outstanding shares of Zymergen Common Stock is necessary to take action at the Special Meeting. Holders of a majority of the outstanding shares of Zymergen Common Stock entitled to vote as of the Record Date must be present, in person, by remote communication, if applicable, or by proxy, at the Special Meeting to constitute a quorum and to conduct business at the Special Meeting. Abstentions are counted as shares present and entitled to vote for the purposes of determining quorum.

 

Q:

Who can vote at the Special Meeting?

 

A:

Stockholders of record who owned Zymergen Common Stock at the close of business on the Record Date are entitled to receive notice of, attend and vote at the Special Meeting. On the Record Date, there were 104,355,336 shares of Zymergen Common Stock outstanding and entitled to vote at the Special Meeting.

Stockholder of Record: Shares Registered in Your Name

If on the Record Date your shares were registered directly in your name with Zymergen’s transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), then you are a stockholder of record. As a stockholder of record, you may vote at the virtual meeting or vote by proxy. Whether or not you plan to attend the virtual meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on the Record Date your shares were held, not in your name, but rather in an account at a broker, bank or other nominee, then you are the beneficial owner of shares held in “street name” and the notice of the Special Meeting accompanying this proxy statement/prospectus (the “Notice”) is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Special Meeting. However, since you are not the stockholder of record, you may not vote your shares at the virtual meeting unless you request and obtain a valid proxy from your broker, bank or other nominee.

 

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Q:

How many votes do I have if I am a Zymergen stockholder?

 

A:

Each share of Zymergen Common Stock that you owned at the close of business on the Record Date, including (i) shares held directly in your name as the stockholder of record and (ii) shares held for you as the beneficial owner in “street name” through a broker, bank or other nominee, entitles you to one vote on each proposal to be presented at the Special Meeting.

 

Q:

How many votes are required to approve each proposal?

 

A:

Proposal 1—Merger Proposal. Approval requires the affirmative vote of a majority of the outstanding shares of Zymergen Common Stock. Abstentions will have the same effect as a vote against the Merger Proposal. In addition, if you do not submit a valid proxy or attend the Special Meeting to vote your shares of Zymergen Common Stock or if you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, it will have the same effect as a vote against the Merger Proposal.

Proposal 2—Adjournment Proposal. Approval requires the affirmative vote of a majority of the shares of Zymergen Common Stock present at the Special Meeting in person, by remote communication, if applicable, or by proxy. Abstentions will have the same effect as a vote against the Adjournment Proposal. If you do not submit a valid proxy or attend the Special Meeting to vote your shares of Zymergen Common Stock or if you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted in determining the outcome of the Adjournment Proposal.

As of the Record Date, (i) there were 104,355,336 shares of Zymergen Common Stock outstanding and entitled to vote at the Special Meeting, (ii) Zymergen directors, executive officers, and their respective affiliates, as a group beneficially held and were entitled to vote 17,539,435 shares of Zymergen Common Stock, representing 16.8% of the voting power of Zymergen Common Stock and (iii) the Voting Agreement Stockholders (who collectively beneficially own, in the aggregate, approximately 40% of the issued and outstanding shares of Zymergen Common Stock) have agreed to vote the shares of Zymergen Common Stock beneficially owned and/or controlled by such Voting Agreement Stockholders in favor of, among other things, the approval of the Merger Proposal and the Adjournment Proposal.

 

Q:

What will happen if all of the proposals to be considered at the Special Meeting are not approved?

 

A:

Approval of the Merger Proposal by the Zymergen stockholders is a condition to the completion of the Merger. As a result, if such approval is not obtained, the Merger will not be completed. Approval of the Adjournment Proposal is not a condition to the completion of the Merger.

 

Q:

Who can attend the Special Meeting?

 

A:

Zymergen stockholders of record, or their duly authorized proxies, may attend the Special Meeting. If you are not a Zymergen stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares to be able to vote in person at the Special Meeting. For more information on attendance requirements for the Special Meeting, see “The Special Meeting” beginning on page 85 of this proxy statement/prospectus.

 

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Q:

How do I vote my shares?

 

A:

Stockholder of Record: Shares Registered in Your Name. You may vote at the Special Meeting, vote by proxy over the telephone, vote by proxy through the Internet or vote by proxy using a proxy card. Whether or not you plan to attend the virtual meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the virtual meeting and vote even if you have already voted by proxy.

 

   

To vote during the virtual Special Meeting, go to www.virtualshareholdermeeting.com/ZY2022SM to vote your shares. You will need the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

 

   

To vote using the proxy card, simply complete, sign and date the proxy card and return it promptly in the envelope provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you return your signed proxy card to us before the Special Meeting, we will vote your shares as you direct.

 

   

To vote over the telephone before the Special Meeting, dial toll-free 1-800-690-6903 using a phone and follow the recorded instructions. You will be asked to provide the company number and control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials. Your telephone vote must be received by 11:59 p.m. Eastern Time on October 16, 2022 to be counted.

 

   

To vote through the Internet before the Special Meeting, go to http://www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials. Your Internet vote must be received by 11:59 p.m. Eastern Time on October 16, 2022 to be counted.

Beneficial Owners: Shares Registered in the Name of Broker or Bank. If you are a beneficial owner of shares registered in the name of your broker, bank or other nominee, you should have received a notice containing voting instructions from that organization rather than from Zymergen. Simply follow the voting instructions in that notice to ensure that your vote is counted. To vote at the virtual Special Meeting, you must obtain a valid proxy from your broker, bank or other nominee. Follow the instructions from your broker, bank or other nominee included with these proxy materials, or contact your broker, bank or other nominee to request a proxy form.

 

Q:

Can I change my vote after I have delivered my proxy?

 

A:

If you are a Zymergen stockholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting. To revoke your proxy, you must:

 

   

submit a new proxy by telephone or over the Internet by 11:59 p.m., Eastern Time, on October 16, 2022;

 

   

sign and return another proxy card, which must be received by 11:59 p.m., Eastern Time, on October 16, 2022;

 

   

provide written notice of the revocation to Zymergen’s Secretary at: Zymergen Inc., Attention: Senior VP, Legal and Secretary, 5959 Horton Street, Suite 700, Emeryville, CA 94608, which must be received by 11:59 p.m., Eastern Time, on October 16, 2022; or

 

   

attend the Special Meeting and vote in person.

If you are the beneficial owner of shares held in “street name” by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee regarding the revocation of proxies.

 

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Q:

What happens if I return a blank proxy?

 

A:

If you are a stockholder of record and return a signed and dated proxy card or otherwise vote without marking voting selections, then your shares will be voted in the manner recommended by the Zymergen Board, or “FOR” the Merger Proposal and “FOR” the Adjournment Proposal.

 

Q:

If my shares of Zymergen Common Stock are held in “street name” by my broker, bank or other nominee, will by broker, bank or other nominee automatically vote those shares for me?

 

A:

If your shares are held in “street name” the “record holder” of such shares is your broker, bank or other nominee, and not you. If this is the case, this proxy statement/ prospectus has been forwarded to you by your broker, bank or other nominee. You must provide the record holder of your shares with instructions on how to vote your shares. Otherwise, your broker, bank or other nominee may not vote your shares on any proposals to be considered at the Special Meeting. A so called “broker non-vote” will result if your broker, bank or other nominee returns a proxy but does not provide instructions as to how shares should be voted on a particular matter.

Brokers, banks or other nominees do not have discretionary authority to vote on any proposals at the Special Meeting. Because the only proposals for consideration at the Special Meeting are nondiscretionary proposals, it is not expected that there will be any broker non-votes at the Special Meeting. However, if there are any broker non-votes, they will have the same effect as (1) a vote against the Merger Proposal and (2) no effect on the Adjournment Proposal.

 

Q:

What if I receive more than one proxy card?

 

A:

If you receive more than one proxy card, it is an indication that your shares of Zymergen Common Stock are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares of Zymergen Common Stock are voted.

 

Q:

What happens if I transfer shares of Zymergen Common Stock before the Special Meeting?

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date that the Merger is expected to be completed. If you transfer your Zymergen Common Stock after the Record Date but before the Special Meeting, unless special arrangements are made, you will retain your right to vote at the Special Meeting. However, you will have transferred the right to receive the Merger Consideration in the Merger. In order to receive the Merger Consideration, you must hold your Zymergen Common Stock through the Effective Time of the Merger.

 

Q:

How will Zymergen’s outstanding equity awards be treated in the Merger?

 

A:

Stock Options. At the Effective Time, each Zymergen Stock Option with an exercise price per share less than the Merger Consideration Value that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into the right to receive a number of shares of Ginkgo Class A Common Stock equal to the Option Consideration Value with respect to such Zymergen Stock Option divided by the Ginkgo Trading Price, and cash in lieu of any fractional share, without interest. Each Zymergen Stock Option with an exercise price per share that is equal to or greater than the Merger Consideration Value will be cancelled for no consideration.

Restricted Stock Units. At the Effective Time, each vested Zymergen RSU that is outstanding immediately prior to the Effective Time (including after giving effect to any acceleration of vesting to which such Zymergen RSU is entitled as of immediately prior to the Effective Time as disclosed to Ginkgo) will be cancelled and converted into a right to receive the Merger Consideration, and cash in lieu of any fractional shares, without interest. Each unvested Zymergen RSU that is outstanding immediately prior to the Effective Time will be cancelled and converted into a Ginkgo restricted stock unit with respect to the number of shares

 

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of Ginkgo Class A Common Stock that is equal to the product of (i) the number of shares of Zymergen Common Stock subject to such unvested Zymergen RSU as of immediately prior to the Effective Time and (ii) the Merger Consideration, rounded down to the nearest whole share, which such Ginkgo restricted stock unit will be subject to the same vesting terms and conditions applicable to the Zymergen RSU to which it relates as of immediately prior to the Effective Time, including any applicable vesting acceleration provisions in connection with such holder’s termination of employment or service, but otherwise will be subject to the terms and conditions of the Ginkgo 2021 Plan.

For further information, please read the section entitled “The Merger Agreement—Treatment of Zymergen Stock Options, RSUs and ESPP Purchases” beginning on page 141 of this proxy statement/prospectus.

 

Q:

Are Ginkgo stockholders voting on the Merger?

 

A:

No. No vote of Ginkgo’s stockholders is required to complete the Merger.

 

Q:

When is the Merger expected to be completed?

 

A:

Ginkgo and Zymergen are working toward completing the Merger as expeditiously as possible and currently expect the Merger to be completed by the first quarter of 2023. However, Ginkgo and Zymergen cannot be certain when, or if, the conditions to the Merger will be satisfied or waived, or that the Merger will be completed.

 

Q:

What conditions must be satisfied to the complete the Merger?

 

A:

Ginkgo and Zymergen are not required to complete the Merger, unless a number of conditions are satisfied or waived, which we refer to as the “closing conditions”. These closing conditions include, among others:

 

   

the affirmative vote of the holders of a majority of the outstanding shares of Zymergen Common Stock as of the Record Date to adopt the Merger Agreement;

 

   

any applicable waiting period (or extensions thereof) under the HSR Act relating to the transactions contemplated by the Merger Agreement must have expired or been terminated (which waiting period expired on September 7, 2022), and if a merger control inquiry is initiated or commenced by a governmental authority outside of the United States, approval in that jurisdiction;

 

   

no law, temporary restraining order, preliminary or permanent injunction issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger will be in effect, and no statute, rule, regulation or order will have been enacted, entered, enforced or deemed applicable to the Merger, that in each case prohibits, makes illegal, or enjoins the consummation of the Merger;

 

   

the registration statement of which this proxy statement/prospectus forms a part shall have become effective in accordance with the provisions of the Securities Act and no stop order suspending the effectiveness of such registration statement shall have been issued by the SEC and remain in effect and no proceeding to that effect shall have been commenced or threatened unless subsequently withdrawn;

 

   

the shares of Ginkgo Class A Common Stock to be issued in the Merger shall have been authorized and approved for listing on the NYSE (or any successor inter-dealer quotation system or stock exchange thereto) subject to official notice of issuance; and

 

   

certain other customary conditions relating to the other party’s representations and warranties in the Merger Agreement and the performance of its respective obligations.

Ginkgo’s obligation to consummate the Merger is also subject to the satisfaction or waiver of the condition that (i) Zymergen has not incurred or otherwise become liable for additional costs, expenses or liabilities with respect to its leased real property not contemplated by its real estate plan provided to Ginkgo prior to

 

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the execution of the Merger Agreement and (ii) certain specified legal proceedings are not reasonably expected to result in future money damages payable by Zymergen or its subsidiaries (in excess of any applicable insurance deductible and coverage amounts), where, the aggregate of clauses (i) and (ii), exceed $25,000,000.

For a more complete summary of the closing conditions that must be satisfied or waived prior to the completion of the Merger, please read the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 142 of this proxy statement/prospectus.

 

Q:

Are there risks associated with the Merger that I should consider in deciding how to vote?

 

A:

Yes. There are a number of risks related to the Merger and the other transactions contemplated by the Merger Agreement that are discussed in this proxy statement/prospectus and in the documents incorporated by reference into this proxy statement/prospectus. Please read carefully the detailed description of the risks described in “Risk Factors” beginning on page 24 of this proxy statement/prospectus.

 

Q:

Am I entitled to appraisal rights?

 

A:

No. Under the DGCL, the holders of Zymergen Common Stock are not entitled to appraisal rights in connection with the Merger.

 

Q:

What are the material U.S. federal income tax consequences of the Merger to U.S. holders of Zymergen Common Stock?

 

A:

Zymergen and Ginkgo intend to treat the exchange of shares of Zymergen Common Stock for shares of Ginkgo Class A Common Stock (and cash in lieu of fractional shares of Ginkgo Class A Common Stock, if any) in the Merger as an exchange in which gain or loss will be recognized for U.S. federal income tax purposes. Therefore, a U.S. Holder (as defined below in the section entitled “Material U.S. Federal Income Tax Consequences” beginning on page 294) generally will recognize capital gain or loss equal to the difference, if any, between the sum of the fair market value of the shares of Ginkgo Class A Common Stock and cash in lieu of fractional shares received and such U.S. Holder’s tax basis in the shares of Zymergen Common Stock surrendered pursuant to the Merger. A U.S. Holder’s tax basis and holding period in the shares of Zymergen Common Stock surrendered pursuant to the Merger and, therefore, the particular tax consequences for a U.S. Holder will depend upon the manner in which the disposed shares were acquired by such U.S. Holder. In the case of shares of Zymergen Common Stock acquired for cash, a U.S. Holder’s tax basis in the shares generally will equal the amount that such U.S. Holder paid for the shares. You should consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances.

Gain or loss recognized by a U.S. Holder will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. Gain or loss and a U.S Holder’s holding period with respect to its Zymergen Common Stock must be determined separately for each block of shares (that is, shares acquired at the same cost in a single transaction). A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.

A U.S. Holder receiving shares of Ginkgo Class A Common Stock pursuant to the Merger will have a tax basis in such shares equal to their fair market value at the completion of the Merger and a holding period that begins with the day after the completion of the Merger.

Please carefully review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences” beginning on page 294 of the proxy statement/prospectus for a more complete description of the material U.S. federal income tax consequences of the Merger. The tax consequences of the Merger to you will depend on your particular circumstances. You should consult your tax advisors regarding the U.S.

 

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federal income tax consequences of the Merger to you in your particular circumstances, as well as the tax consequences arising under other U.S. federal tax laws and the laws of any state, local or foreign taxing jurisdiction.

 

Q:

What happens if the Merger is not completed?

 

A:

If the Merger is not completed, Zymergen stockholders will not receive any consideration for their shares of Zymergen Common Stock. Instead, Zymergen and Ginkgo will remain independent public companies, and shares of Zymergen Common Stock and Ginkgo Class A Common Stock will continue to be independently listed and traded on Nasdaq and the NYSE, respectively. Under certain circumstances, in the event the Merger Agreement is terminated pursuant to its terms, Zymergen or Ginkgo may be required to pay the other party a termination fee. The termination fees are described in more detail in “The Merger Agreement—Termination Fees and Expenses” beginning on page 153 of this proxy statement/prospectus.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Zymergen has retained MacKenzie Partners, Inc. to assist with the solicitation process. Zymergen will pay MacKenzie Partners, Inc. a fee of approximately $15,000, as well as reimbursement expenses. Zymergen also has agreed to indemnify MacKenzie Partners, Inc. against various liabilities and of expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). Zymergen will ask brokers, banks and other nominees to forward their proxy solicitation materials to the beneficial owners of shares of Zymergen Common Stock held of record by such brokers, banks and other nominees. Zymergen will reimburse these brokers, banks and other nominees for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

 

Q:

Who can help answer my questions?

 

A:

If you are a Zymergen stockholder and have any questions about the Merger or how to submit your proxy or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact the firm assisting us with the solicitation:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Call Toll-free: 1-800-322-2885

 

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SUMMARY

This summary highlights selected information described in more detail elsewhere in this proxy statement/prospectus and the documents incorporated herein by reference and may not contain all of the information that is important to you. To understand the Merger and the other matters to be voted on by Zymergen stockholders at the Special Meeting more fully, and to obtain a more complete description of the terms of the Merger Agreement, you should carefully read this entire proxy statement/prospectus, including the Annexes, and the documents to which Ginkgo and Zymergen refer you. You should also read and consider the important business and financial information about Zymergen in the documents incorporated by reference in this proxy statement/prospectus described under “Incorporation of Certain Information by Reference” beginning on page 317, as well as the additional information described under “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus. Ginkgo and Zymergen have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

Defined terms used in this summary but not otherwise defined shall have the meanings set forth in “The Merger” and “The Merger Agreement” beginning on pages 98 and 140 of this proxy statement/prospectus.

The Companies (see page 83)

Zymergen Inc.

Zymergen partners with nature to design, develop and commercialize microbes, molecules, and materials for diverse end markets. The platform revolves around three key capabilities: the collection of accessible biomolecules, the software and data science technology and the data driven microbe optimization processes. Zymergen has one of the world’s largest collections of accessible biomolecules. This physical and DNA sequence database has within it the potential to create hundreds of thousands of small molecules, millions of natural products and hundreds of millions of proteins.

Zymergen Common Stock is listed on Nasdaq under the symbol “ZY.”

Zymergen’s current contact information is as follows:

Zymergen Inc.

5959 Horton Street, Suite 700

Emeryville, CA 94608

Telephone: (415) 801-8073

Additional information about Zymergen and its subsidiaries is included in the documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference beginning on page 317 of this proxy statement/prospectus.

Ginkgo Bioworks Holdings, Inc.

Ginkgo is building a platform to enable customers to program cells as easily as we can program computers. Ginkgo’s platform is enabling biotechnology applications across diverse markets, from food and agriculture to industrial chemicals to pharmaceuticals. Ginkgo has also actively supported a number of COVID-19 response efforts, including K-12 pooled testing, vaccine manufacturing optimization and therapeutics discovery.

Ginkgo Class A Common Stock is listed on the NYSE under the symbol “DNA.”

 

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Ginkgo’s current contact information is as follows:

Ginkgo Bioworks Holdings, Inc.

27 Drydock Avenue, 8th Floor

Boston, MA 02210

Telephone: (877) 422-5362

Additional information about Ginkgo and its subsidiaries can be found under “Information About Ginkgo” beginning on page 166 of this proxy statement/prospectus and “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus.

Pepper Merger Subsidiary Inc.

Merger Sub, a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo, was organized solely for the purpose of entering into the Merger Agreement and completing the Merger and other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will cease to exist, with Zymergen surviving the Merger as an indirect wholly owned subsidiary of Ginkgo under the name “Zymergen Inc.”

Merger Sub’s current contact information is as follows:

Pepper Merger Subsidiary Inc.

c/o Ginkgo Bioworks Holdings, Inc.

27 Drydock Avenue, 8th Floor

Boston, MA 02210

Telephone: (877) 422-5362

The Merger (see page 98)

The Zymergen Board and the Ginkgo Board have unanimously approved the Merger Agreement, pursuant to which Merger Sub, an indirect wholly owned subsidiary of Ginkgo, will merge with and into Zymergen, with Zymergen surviving the Merger. As a result of the Merger, Zymergen will become an indirect wholly owned subsidiary of Ginkgo. Based on the estimated number of shares of Zymergen Common Stock and Ginkgo Class A Common Stock outstanding on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, Zymergen and Ginkgo estimate that, upon completion of the Merger, former Zymergen stockholders and certain other Zymergen equityholders will own approximately 5.25% of Ginkgo on a fully diluted basis.

At the Special Meeting to be held at 11:00 a.m. Pacific Daylight Time, on October 17, 2022, via the Internet at www.virtualshareholdermeeting.com/ZY2022SM, you will be asked to consider and vote upon the Merger Proposal and the Adjournment Proposal.

Zymergen stockholders are receiving this proxy statement/prospectus in connection with Zymergen’s solicitation of proxies for the Special Meeting.

The Merger Agreement (see page 140)

A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein in its entirety. Ginkgo and Zymergen encourage you to read the entire Merger Agreement carefully because it is the principal document governing the Merger.

 

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Merger Consideration (see page 141)

At the Effective Time, each share of Zymergen Common Stock that is issued and outstanding as of immediately prior to the Effective Time (other than shares (i) held by Zymergen as treasury stock; (ii) owned by Ginkgo or Merger Sub; or (iii) owned by any direct or indirect wholly owned Subsidiary of Ginkgo or Merger Sub as of immediately prior to the Effective Time) will be automatically cancelled, extinguished and converted into the right to receive 0.9179 of a share of Ginkgo Class A Common Stock. No fractional shares of Ginkgo Class A Common Stock will be issued in the Merger and Zymergen’s stockholders will receive cash in lieu of any fractional share, without interest.

Based on the closing price of shares of Ginkgo Class A Common Stock on the NYSE on September 9, 2022, the last practicable trading day before the mailing of this proxy statement/prospectus, the Merger Consideration represented $2.70 in value for each share of Zymergen Common Stock.

Risk Factors (see page 24)

In evaluating the Merger and the proposals to be considered and voted on at the Zymergen special meeting, you should carefully review and consider the risk factors summarized below and set forth in the section titled “Risk Factors.” The occurrence of one or more of the events or circumstances summarized below or in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of Ginkgo and Zymergen to complete the Merger and (ii) the business, cash flows, financial condition and results of operations of Ginkgo following consummation of the Merger. The risks associated with the business of Zymergen (including related to the transaction) can be found in Zymergen’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 2022 and June 30, 2022, as updated from time to time by Zymergen’s subsequent filings with the SEC, which are incorporated by reference into this proxy statement/prospectus.

The following is only a summary of principal risks that are related to the Merger, the business of Ginkgo and the business of Ginkgo following the Merger. Such risks are discussed in more detail below in the section titled “Risk Factors” and you should read the Risk Factors section carefully and in its entirety. Some of these risks include, but are not limited to, the following risks:

Risk Factors Related to the Merger

 

   

The failure to complete the Merger in a timely manner, or at all, may adversely affect the business and financial results of Ginkgo and Zymergen and their respective stock prices.

 

   

Ginkgo and Zymergen must obtain certain regulatory consents and approvals to consummate the Merger, which, if delayed, not granted or granted with burdensome or unacceptable conditions, could prevent, substantially delay or impair consummation of the Merger, result in additional expenditures of money and resources or reduce the anticipated benefits of the Merger.

 

   

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Ginkgo or Zymergen.

 

   

Uncertainty about the Merger may adversely affect the respective business and stock price of Ginkgo and Zymergen, whether or not the Merger is completed.

 

   

While the Merger is pending, Zymergen is subject to contractual restrictions that could harm its business, operating results and stock price.

 

   

The Merger Agreement limits Zymergen’s ability to pursue alternative transactions which could deter a third party from proposing an alternative transaction.

 

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The fairness opinion obtained by the Zymergen Board from its financial advisor will not be updated to reflect changes in circumstances between signing the Merger Agreement and the completion of the Merger.

 

   

Certain directors and executive officers of Zymergen may have interests in the Merger that are or were different from, or in conflict with or in addition to, those of Zymergen’s stockholders generally.

 

   

Ginkgo or Zymergen may waive one or more of the closing conditions without re-soliciting stockholder approval from Zymergen stockholders.

 

   

Zymergen and Ginkgo may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Risk Factors Relating to Ginkgo Following the Merger

 

   

Ginkgo may fail to realize the benefits and synergies expected from the Merger, which could adversely affect its stock price.

 

   

The acquisition of Zymergen may result in significant charges or other liabilities that could adversely affect the financial results of the combined company.

 

   

Ginkgo’s future results will suffer if it does not effectively manage its expanded operations and geographic footprint following the Merger.

 

   

The market price of Ginkgo Class A Common Stock after completion of the Merger will continue to fluctuate, and may be affected by factors different from those affecting shares of Zymergen Common Stock currently.

 

   

The combined company may not be able to retain customers, suppliers or distributors, or customers, suppliers or distributors may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with Ginkgo or Zymergen.

Risk Factors Relating to Ginkgo’s Business

 

   

Ginkgo has a history of net losses. Ginkgo expects to continue to incur losses for the foreseeable future, and may never achieve or maintain profitability.

 

   

Ginkgo may need substantial additional capital in the future in order to fund its business.

 

   

Ginkgo has experienced rapid growth and expects growth to continue, and if Ginkgo fails to effectively manage its growth, then its business, results of operations, and financial condition could be adversely affected.

 

   

Ginkgo currently owns and may in the future own equity interests in other operating companies, including certain of its customers; consequently, Ginkgo has exposure to the volatility and liquidity risks inherent in holding its equity and overall operational and financial performance of its businesses.

 

   

Ginkgo leverages its own resources and partners with strategic and financial investors in order to help early stage companies and innovators secure funding and benefit from its platform, which exposes Ginkgo to a number of risks.

 

   

Ginkgo may be unable to complete pending strategic acquisitions or successfully integrate strategic acquisitions which could adversely affect its business and financial condition.

 

   

Ginkgo’s programs may not achieve milestones and other anticipated key events on the expected timelines or at all, which could have an adverse impact on its business and could cause the price of Ginkgo Class A Common Stock to decline.

 

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Ginkgo must continue to secure and maintain sufficient and stable supplies of laboratory reagents, consumables, equipment, and laboratory services. Ginkgo depends on a limited number of suppliers, some of which are single-source suppliers, and contract manufacturers for critical supplies, equipment, and services for research, development, and manufacturing of Ginkgo’s products and processes.

 

   

Ginkgo could synthesize DNA sequences or engage in other activity that inadvertently contravenes biosecurity requirements, or regulatory authorities could promulgate more far-reaching biosecurity requirements that its standard business practices cannot accommodate, which could give rise to substantial legal liability, impede Ginkgo’s business, and damage its reputation.

 

   

International expansion of Ginkgo’s business exposes it to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

 

   

Ginkgo relies on its customers to develop, produce and manufacture products using the engineered cells and/or biomanufacturing processes that Ginkgo develops. If these initiatives by Ginkgo’s customers are not successful or do not achieve commercial success, or if Ginkgo’s customers discontinue their development, production and manufacturing efforts using Ginkgo’s engineered cells and/or biomanufacturing processes, Ginkgo’s future financial position may be adversely impacted.

 

   

If Ginkgo is unable to obtain, maintain and defend patents protecting its intellectual property, its competitive position will be harmed.

 

   

If Ginkgo is unable to protect the confidentiality of its trade secrets, its business and competitive position will be harmed.

 

   

Loss of key personnel, including Ginkgo’s founders and senior executives, and/or failure to attract, train and retain additional key personnel could delay Ginkgo’s cell engineering programs, harm its platform development efforts, limit its biosecurity offerings, and harm its ability to meet its business objectives, particularly given the substantial investment required to train certain of its employees.

 

   

Only Ginkgo’s employees and directors are entitled to hold shares of Ginkgo Class B Common Stock (including shares of Ginkgo Class B Common Stock granted or otherwise issued to Ginkgo employees and directors in the future), which shares have 10 votes per share. This limits or precludes other stockholders’ ability to influence the outcome of matters submitted to stockholders for approval, including the election of directors, the approval of certain employee compensation plans, the adoption of certain amendments to Ginkgo’s organizational documents and the approval of any merger, consolidation, sale of all or substantially all of its assets, or other major corporate transaction requiring stockholder approval.

Information About the Special Meeting (see page 85)

The Special Meeting will be held at 11:00 a.m. Pacific Daylight Time, on October 17, 2022, via the Internet at www.virtualshareholdermeeting.com/ZY2022SM.

Holders of record of Zymergen Common Stock at the close of business on the Record Date will be entitled to notice of, and will be asked to consider and vote at, the Special Meeting with regard to the following proposals:

 

   

the Merger Proposal; and

 

   

the Adjournment Proposal.

On the Record Date, there were 104,355,336 shares of Zymergen Common Stock outstanding and entitled to vote at the Special Meeting, held by approximately 68 holders of record. Each share of Zymergen Common Stock issued and outstanding on the Record Date is entitled to one vote on each proposal to be voted upon at the Special Meeting.

 

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Completion of the Merger is conditioned on the approval by Zymergen stockholders of the Merger Proposal. Approval of the Merger Proposal requires the affirmative vote of a majority of the outstanding shares of Zymergen Common Stock. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of Zymergen Common Stock present at the Special Meeting in person, by remote communication, if applicable, or by proxy.

Ginkgo’s Reasons for the Merger (see page 113)

After careful consideration, the Ginkgo Board unanimously (i) determined it to be advisable and fair to, and in the best interests of, Ginkgo and its stockholders to enter into the Merger Agreement and the Voting Agreements, and to consummate the transactions contemplated thereby (including the Merger); and (ii) approved and adopted the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger).

In arriving at its determination, the Ginkgo Board held a number of meetings and consulted with Ginkgo’s management and its financial, accounting and legal advisors, and considered a number of positive factors in favor of the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger). For the factors considered by the Ginkgo Board in reaching its decision to approve the Merger Agreement and the Voting Agreement, and the transactions contemplated thereby (including the Merger), see “The Merger—Ginkgo’s Reasons for the Merger” beginning on page 113 of this proxy statement/prospectus.

Recommendation of the Zymergen Board and Zymergen’s Reasons for the Merger (see page 115)

After careful consideration, and after balancing the financial interests of Zymergen stockholders, those materially affected by Zymergen’s conduct, and Zymergen’s specific public benefit purpose, the Zymergen Board has unanimously: (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen, (ii) declared it advisable to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (iii) approved the execution and delivery by Zymergen of the Merger Agreement, the performance by Zymergen of its covenants and other obligations thereunder and the consummation of the transactions contemplated thereby, including the Merger, upon the terms and subject to the conditions set forth therein; (iv) agreed that the Merger, upon the terms and subject to the conditions contained in the Merger Agreement, is authorized and approved in accordance with the requirements of the DGCL; and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.

For the factors considered by the Zymergen Board in reaching its decision to approve the Merger Agreement, see “The Merger—Recommendation of Zymergen Board and Zymergen’s Reasons for the Merger” beginning on page 115 of this proxy statement/prospectus.

Opinion of Financial Advisor to Zymergen (see page 121)

Pursuant to an engagement letter dated May 6, 2022, Zymergen retained Cowen to act as its financial advisor in connection with certain potential transactions, including a possible sale of or other business combination involving Zymergen, and to render an opinion to the Zymergen Board as to the fairness, from a financial point of view, to the holders of Zymergen Common Stock, other than holders of Owned Company Shares (as defined in the Merger Agreement) (the “Owned Company Shares”), of the Exchange Ratio to be received by the stockholders of Zymergen pursuant to the terms of the Merger Agreement. On July 23, 2022, Cowen delivered certain of its written analyses and its oral opinion to the Zymergen Board, subsequently confirmed in writing as of July 24, 2022, to the effect that, based upon and subject to the various assumptions, qualifications and limitations set forth therein, as of July 24, 2022, the Exchange Ratio to be received by the

 

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holders of Zymergen Common Stock in the Merger was fair, from a financial point of view, to the stockholders of Zymergen, other than holders of Owned Company Shares.

The full text of the written opinion of Cowen, dated July 24, 2022, is attached as Appendix E and is incorporated by reference. Holders of Zymergen Common Stock are urged to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Cowen. The summary of the written opinion of Cowen set forth herein is qualified in its entirety by reference to the full text of such opinion. Cowen’s analyses and opinion were prepared for and addressed to the Zymergen Board and are directed only to the fairness, from a financial point of view, of the Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger, other than holders of Owned Company Shares, and do not constitute an opinion as to the merits of the Merger or a recommendation to any stockholder or any other person as to how to vote on the Merger. The Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger was determined through negotiations between Zymergen and Ginkgo and not pursuant to any recommendation of Cowen. Cowen’s opinion is not a recommendation to any stockholder or any other person as to how to vote with respect to the merger or whether such stockholder or such person should take any other action in connection with the merger or otherwise.

For a description of the opinion that the Zymergen Board received from Cowen, see “The Merger—Opinion of Financial Advisor to Zymergen” beginning on page 121 of this proxy statement/prospectus.

Treatment of Zymergen Stock Options, RSUs and ESPP Purchases (see page 141)

At the Effective Time, each Zymergen Stock Option with an exercise price per share less than the Merger Consideration Value that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into the right to receive a number of shares of Ginkgo Class A Common Stock equal to the Option Consideration Value with respect to such Zymergen Stock Option divided by the Ginkgo Trading Price, and cash in lieu of any fractional share, without interest. Each Zymergen Stock Option with an exercise price per share that is equal to or greater than the Merger Consideration Value will be cancelled for no consideration.

Additionally, at the Effective Time, each vested Zymergen RSU that is outstanding immediately prior to the Effective Time (including after giving effect to any acceleration of vesting to which such Zymergen RSU is entitled as of immediately prior to the Effective Time as disclosed to Ginkgo) will be cancelled and converted into a right to receive the Merger Consideration, and cash in lieu of any fractional shares, without interest. Each unvested Zymergen RSU that is outstanding immediately prior to the Effective Time will be cancelled and converted into a Ginkgo restricted stock unit with respect to the number of shares of Ginkgo Class A Common Stock that is equal to the product of (i) the number of shares of Zymergen Common Stock subject to such unvested Zymergen RSU as of immediately prior to the Effective Time and (ii) the Merger Consideration, rounded down to the nearest whole share, which such Ginkgo restricted stock unit will be subject to the same vesting terms and conditions applicable to the Zymergen RSU to which it relates as of immediately prior to the Effective Time, including any applicable vesting acceleration provisions in connection with such holder’s termination of employment or service, but otherwise will be subject to the terms and conditions of the Ginkgo 2021 Plan.

For more information, see “The Merger Agreement—Merger Consideration—Treatment of Zymergen Stock Options, RSUs and ESPP Purchases” beginning on page 141 of this proxy statement/prospectus.

Interests of Zymergen Directors and Executive Officers in the Merger (see page 131)

In considering the recommendation of the Zymergen Board to adopt the Merger Agreement, Zymergen stockholders should be aware that Zymergen’s directors and executive officers have interests in the Merger that

 

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may be different from, or in addition to, the interests of Zymergen stockholders generally, including potential severance benefits, treatment of outstanding Zymergen equity awards in connection with the transaction, potential transaction and retention bonuses, and rights to ongoing indemnification and insurance coverage. The Zymergen Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve and declare advisable the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger), and in recommending to Zymergen stockholders that the Merger Agreement be approved. These interests are discussed in more detail in the section entitled “The Merger—Interests of Zymergen’s Directors and Executive Officers in the Merger.”

The Voting Agreements (see page 165)

In connection with the Merger Agreement, Ginkgo entered into the Voting Agreements with each of the Voting Agreement Stockholders. The Voting Agreement Stockholders together beneficially own, in the aggregate, approximately 40% of the issued and outstanding shares of Zymergen Common Stock as of July 22, 2022, the last trading day before the public announcement of the Merger Agreement.

The Voting Agreement Stockholders have separately agreed, pursuant to their respective Voting Agreements, among other things, to vote all shares of Zymergen Common Stock beneficially owned and entitled to vote at any annual or special meeting of Zymergen’s stockholders called with respect to the following matters, among others: (a) in favor of (i) adopting the Merger Agreement and (ii) any proposal to adjourn or postpone such meeting of stockholders of Zymergen to a later date if there are not sufficient votes to adopt the Merger Agreement; and (b) against (i) any action, proposal, transaction, or agreement which would reasonably be expected to result in any of the conditions to Zymergen’s obligations to consummate the Merger set forth in Article VII of the Merger Agreement not being fulfilled, and (ii) any action, proposal, transaction, or agreement that could reasonably be expected to impede, interfere with, delay, discourage, adversely affect, or inhibit the timely consummation of the Merger or the fulfillment of Ginkgo’s, Merger Sub’s or Zymergen’s conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of Zymergen.

For more information, see “The Voting Agreements” beginning on page 165 of this proxy statement/prospectus.

Conditions to the Merger (see page 142)

The obligations of Ginkgo, Merger Sub and Zymergen to effect the Merger are subject to the satisfaction or waiver of certain conditions, including the following:

 

   

the affirmative vote of the holders of a majority of the outstanding shares of Zymergen Common Stock as of the Record Date to adopt the Merger Agreement;

 

   

any applicable waiting period (or extensions thereof) under the HSR Act relating to the transactions contemplated by the Merger Agreement must have expired or been terminated (which waiting period expired on September 7, 2022) and if a merger control inquiry is initiated or commenced by a governmental authority outside of the United States, approval in that jurisdiction;

 

   

no law, temporary restraining order, preliminary or permanent injunction issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger will be in effect, and no statute, rule, regulation or order will have been enacted, entered, enforced or deemed applicable to the Merger, that in each case prohibits, makes illegal, or enjoins the consummation of the Merger;

 

   

the registration statement of which this proxy statement/prospectus forms a part shall have become effective in accordance with the provisions of the Securities Act and no stop order suspending the

 

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effectiveness of such registration statement shall have been issued by the SEC and remain in effect and no proceeding to that effect shall have been commenced or threatened unless subsequently withdrawn;

 

   

the shares of Ginkgo Class A Common Stock to be issued in the Merger shall have been authorized and approved for listing on the NYSE (or any successor inter-dealer quotation system or stock exchange thereto) subject to official notice of issuance; and

 

   

certain other customary conditions relating to the other party’s representations and warranties in the Merger Agreement and the performance of its respective obligations.

Ginkgo’s obligation to consummate the Merger is also subject to the satisfaction or waiver of the condition that (i) Zymergen has not incurred or otherwise become liable for additional costs, expenses or liabilities with respect to its leased real property not contemplated by its real estate plan provided to Ginkgo prior to the execution of the Merger Agreement and (ii) certain specified legal proceedings are not reasonably expected to result in future money damages payable by Zymergen or its subsidiaries (in excess of any applicable insurance deductible and coverage amounts), where, the aggregate of clauses (i) and (ii), exceed $25,000,000.

For more information, see “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 142 of this proxy statement/prospectus.

No Solicitation of Acquisition Proposals and Change of Recommendation (see page 146)

The Merger Agreement prohibits Zymergen from soliciting an alternative transaction to the Merger. Under these “no solicitation” provisions, Zymergen has agreed that, from the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms, Zymergen will not, and will use reasonable best efforts to cause its representatives not to, directly or indirectly:

 

   

solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that constitutes or could reasonably be expected to lead to any Zymergen takeover proposal;

 

   

furnish to any person any non-public information relating to Zymergen or its subsidiaries with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, a Zymergen takeover proposal or any inquiries or the making of any proposal or offer that could reasonably be expected to lead to a Zymergen takeover proposal;

 

   

participate or engage in discussions or negotiations with any person with respect to a Zymergen takeover proposal, except to inform such persons of the Merger Agreement restrictions regarding the same or to clarify the terms and conditions of any Zymergen takeover proposal;

 

   

approve, endorse or recommend a Zymergen takeover proposal;

 

   

enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to a Zymergen takeover proposal; or

 

   

resolve or agree to do any of the foregoing.

The Merger Agreement requires that, from the date of the Merger Agreement, Zymergen will as promptly as reasonably practicable (and, in any event, within two calendar days), notify Ginkgo in writing of any Zymergen takeover proposal or offers or proposals that could reasonably be expected to lead to a Zymergen takeover proposal, any request for non-public information, or any discussions or negotiations sought to be initiated or continued with Zymergen or its representative. Such notice must include (i) the identity of the person or group making such offers or proposals; (ii) a summary of the material terms and conditions of such offers or proposals; and (iii) copies of all written materials related thereto sent or provided to Zymergen that describe any material

 

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terms or conditions of any Zymergen takeover proposal (as well as written summaries of any material oral communications addressing such matters). Thereafter, Zymergen must also keep Ginkgo reasonably informed, on a prompt basis of the status and terms of any such offers or proposals (including any amendments thereto) and the status of any such discussions or negotiations.

Notwithstanding these restrictions, the Merger Agreement also provides that if, at any time prior to the adoption of the Merger Proposal by the Zymergen stockholders, Zymergen receives a bona fide written Zymergen takeover proposal made after the date of the Merger Agreement, but not as a result of a breach of Zymergen’s no solicitation obligations in the Merger Agreement, and the Zymergen Board concludes in good faith (and after consultation with its financial advisors and outside legal counsel) that it constitutes, or would reasonably be expected to lead to, a Superior Proposal (as defined below in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation”) and the failure to take the below-described actions would be reasonably likely to be inconsistent with the Zymergen directors’ fiduciary duties under applicable law, then the Zymergen Board may take the following actions:

 

   

participate or engage in discussions or negotiations with the person (and such person’s representatives) making such Zymergen takeover proposal;

 

   

furnish any non-public information relating to Zymergen or any of its subsidiaries; or

 

   

afford access to the business, properties, assets, books, records, or other non-public information, or to any personnel of Zymergen or its subsidiaries pursuant to a confidentiality agreement generally no less restrictive than the amended and restated confidentiality agreement entered into between Zymergen and Ginkgo on June 16, 2022.

Further, Zymergen must provide to Ginkgo any non-public information or data that is provided to any person given such access that was not previously made available to Ginkgo prior to or substantially concurrently to (and within 24 hours of) the time it is provided to such person.

For more information, see “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation beginning on page 146 of this proxy statement/prospectus.

Efforts to Consummate the Merger; Regulatory Matters (see page 150)

Ginkgo and Zymergen have agreed to use reasonable best efforts to consummate and make effective the Merger as promptly as practicable (and in any event by the Termination Date), including using reasonable best efforts to take all actions reasonably necessary to comply promptly with all applicable legal requirements and national securities exchange requirements.

On August 8, 2022, Ginkgo and Zymergen filed their respective notification and report forms under the HSR Act with the Antitrust Division of the DOJ and the FTC. The applicable waiting period under the HSR Act expired on September 7, 2022.

For more information, see “The Merger Agreement—Efforts to Consummate the Merger; Regulatory Matters” beginning on page 150 of this proxy statement/prospectus.

Termination of the Merger Agreement (see page 152)

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time under the following circumstances, subject to certain exceptions:

 

   

at any time prior to the Effective Time, by mutual written agreement of Ginkgo and Zymergen;

 

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at any time prior to the Effective Time, by either Ginkgo or Zymergen in the event of a permanent injunction, other judgment or legal or regulatory restraint or prohibition preventing the consummation of the Merger, or any action has been taken by a governmental authority to prohibit, make illegal or enjoin the consummation of the Merger, which has become final and non-appealable, or any statute, rule, regulation or order prohibits or makes illegal the consummation of the Merger;

 

   

at any time prior to the Effective Time, by either Ginkgo or Zymergen, if the Effective Time has not occurred by 11:59 p.m., New York City time, on January 24, 2023, subject to two extension rights by the parties of three months each (for a total of twelve months from the signing of the Merger Agreement) if all of the closing conditions other than certain conditions related to receipt of regulatory approvals are satisfied or waived (or are capable of being satisfied at such time);

 

   

at any time prior to the Effective Time, by either Ginkgo or Zymergen, if Zymergen fails to obtain the requisite Zymergen stockholder approval at the Special Meeting (or any adjournment or postponement thereof) at which a vote is taken on the Merger, unless Zymergen’s actions are the cause of the failure to obtain the requisite Zymergen stockholder approval at the Special Meeting (or any adjournment or postponement thereof);

 

   

by Ginkgo, if Zymergen materially breached or failed to perform any of its representations, warranties, covenants or other agreements in the Merger Agreement; provided that Ginkgo gave written notice to Zymergen of such breach forty-five days prior to the termination of the Merger Agreement (or such shorter period of time as remains prior to the Termination Date) and such breach is not cured or capable of being cured during such notice period;

 

   

by Ginkgo, if (i) at any time the Zymergen Board has effected a Zymergen Board Recommendation Change, (ii) Zymergen committed a willful and material breach of its no solicitation obligations under the Merger Agreement or (iii) there is a material and adverse development in specified legal proceedings that was not disclosed or made available to Ginkgo prior to the date of the Merger Agreement (except that Ginkgo’s right to terminate under clause (iii) expires on the 10th day following the date on which Zymergen sends written notice to Ginkgo concerning the development);

 

   

by Zymergen, if Ginkgo or Merger Sub materially breached or failed to perform any of its respective representations, warranties, covenants or other agreements in the Merger Agreement; provided that Zymergen gave written notice to Ginkgo of such breach forty-five days prior to the termination of the Merger Agreement (or such shorter period of time as remains prior to the Termination Date) and such breach is not cured or capable of being cured during such notice period;

 

   

by Zymergen, at any time prior to receiving the requisite Zymergen stockholder approval at the Special Meeting if (i) Zymergen has received a Superior Proposal; and (ii) Zymergen enters into an alternative acquisition agreement contemplated by that Superior Proposal and pays the Zymergen Termination Fee (as defined below).

For more information, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 152 of this proxy statement/prospectus.

Termination Fees and Expenses (see page 153)

Zymergen and Ginkgo will generally each pay its own fees and expenses in connection with the Merger, whether or not the Merger is consummated. In addition, Ginkgo and Zymergen are each required to pay a termination fee in certain circumstances, as described below.

Zymergen must pay to Ginkgo a termination fee of $10,000,000 if the Merger Agreement is validly terminated in connection with certain specified circumstances, related to Zymergen accepting a Superior

 

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Proposal, willful and material breach of its no solicitation obligations or if the Zymergen Board’s withdraws or changes its recommendation of the Merger to the Zymergen stockholders. Additionally, Zymergen will be required to pay this termination fee to Ginkgo if the Merger Agreement is terminated in certain circumstances and Zymergen enters into an agreement or completes an alternative proposal to acquire Zymergen within 12 months of such termination.

Ginkgo will be required to pay a termination fee to Zymergen equal to $10,000,000 only if the Merger Agreement is validly terminated under specified circumstances upon the failure to satisfy certain conditions related to receipt of regulatory clearances if all other conditions to closing have been satisfied.

For more information, see “The Merger Agreement—Termination Fees and Expenses” beginning on page 153 of this proxy statement/prospectus.

Accounting Treatment of the Merger (see page 139)

Ginkgo and Zymergen both prepare their respective financial statements in accordance with GAAP. Ginkgo will be the accounting acquiror of Zymergen and apply the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). Accordingly, the consideration transferred by Ginkgo to complete the Merger will be allocated to Zymergen’s assets and liabilities based on their estimated fair values as of the Merger completion date. The acquisition method of accounting is dependent upon certain valuation assumptions, including those related to the preliminary purchase price allocation of the Zymergen assets acquired and liabilities assumed based on Ginkgo management’s best estimates of fair value. In addition, the acquisition method of accounting requires the acquirer to recognize the consideration transferred at fair value. As the Merger is an all-stock transaction, consideration transferred fluctuates with changes in Ginkgo’s stock price and will not be fixed until the Merger completion date. Any excess of the purchase price over the net fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Alternatively, any excess of the estimated fair value of assets acquired and liabilities assumed over the purchase price would be recorded as a bargain purchase gain.

All unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus was prepared using the acquisition method of accounting. The final allocation of the purchase price will be determined after the Merger is completed and after completion of an analysis to determine the estimated net fair value of Zymergen’s assets and liabilities and the fair value of the consideration transferred. Accordingly, the final acquisition accounting adjustments may be materially different from the unaudited pro forma adjustments. The results of operations for the combined company will be reported prospectively subsequent to the acquisition date.

Material U.S. Federal Income Tax Consequences (see page 294)

Zymergen and Ginkgo intend to treat the exchange of shares of Zymergen Common Stock for shares of Ginkgo Class A Common Stock (and cash in lieu of fractional shares of Ginkgo Class A Common Stock, if any) in the Merger as an exchange in which gain or loss will be recognized for U.S. federal income tax purposes. Therefore, a U.S. Holder generally will recognize capital gain or loss equal to the difference, if any, between the sum of the fair market value of the shares of Ginkgo Class A Common Stock and cash in lieu of fractional shares received and such U.S. Holder’s tax basis in the shares of Zymergen Common Stock surrendered pursuant to the Merger. A U.S. Holder’s tax basis and holding period in the shares of Zymergen Common Stock surrendered pursuant to the Merger and, therefore, the particular tax consequences for a U.S. Holder will depend upon the manner in which the disposed shares were acquired by such U.S. Holder. In the case of shares of Zymergen Common Stock acquired for cash, a U.S. Holder’s tax basis in the shares generally will equal the amount that such U.S. Holder paid for the shares. You should consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances.

 

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Gain or loss recognized by a U.S. Holder will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. Gain or loss and a U.S Holder’s holding period with respect to its Zymergen Common Stock must be determined separately for each block of shares (that is, shares acquired at the same cost in a single transaction). A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.

A U.S. Holder receiving shares of Ginkgo Class A Common Stock pursuant to the Merger will have a tax basis in such shares equal to their fair market value at the completion of the Merger and a holding period that begins with the day after the completion of the Merger.

Comparison of the Rights of Holders of Ginkgo Class A Common Stock and Zymergen Common Stock (see page 286)

Upon completion of the Merger, Zymergen stockholders will become stockholders of Ginkgo and their rights will be governed by Delaware law and the governing corporate documents of Ginkgo. Zymergen stockholders will have, in some respects, different rights once they become Ginkgo stockholders due to differences between the governing corporate documents of each of the entities. These differences are described in detail in “Comparison of Rights of Holders of Ginkgo Class A Common Stock and Zymergen Common Stock” beginning on page 286 of this proxy statement/prospectus.

No Appraisal Rights in Connection with the Merger (see page 139)

Section 262 of the DGCL provides that stockholders have the right, in some circumstances, to dissent from certain corporate actions and to instead demand payment of the fair value of their shares as determined by the Delaware Court of Chancery. Stockholders do not have appraisal rights with respect to shares of any class or series of stock if such shares of stock, or depositary receipts in respect thereof, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders are required by the terms of the merger agreement to receive in exchange for their shares in the merger anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Therefore, because shares of Zymergen Common Stock are listed on Nasdaq, and the Merger Consideration consists of only shares of Ginkgo Class A Common Stock, which will be listed on the NYSE, and cash in lieu of fractional shares, holders of Zymergen Common Stock are not entitled to appraisal rights in the Merger with respect to their shares of Zymergen Common Stock under Section 262 of the DGCL.

 

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COMPARATIVE MARKET PRICE INFORMATION

Ginkgo Class A Common Stock is listed on the NYSE under the symbol “DNA.” Zymergen Common Stock is listed on Nasdaq under the symbol “ZY.” The following table presents the closing prices of Ginkgo Class A Common Stock and Zymergen Common Stock on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, and September 9, 2022, the last practicable trading day prior to the mailing of this proxy statement/prospectus. The table also shows the equivalent per share value of the Merger Consideration for a share of Zymergen Common Stock on the relevant date. Equivalent per share amounts for Zymergen Common Stock are calculated by multiplying per share information for Ginkgo Class A Common Stock by the Exchange Ratio of 0.9179, rounded to the nearest whole cent.

 

Date

   Ginkgo
Closing Price
     Zymergen
Closing Price
     Equivalent Value Per
Share of Zymergen
Common Stock
 

July 22, 2022

   $ 2.92      $ 2.00      $ 2.68  

September 9, 2022

   $ 2.94      $ 2.63      $ 2.70  

The above table shows only historical comparisons. These comparisons may not provide meaningful information to Zymergen stockholders in determining whether to approve the adoption of the Merger Agreement. Because the Exchange Ratio will not be adjusted for changes in the market price of Ginkgo Class A Common Stock, the market value of the shares of Ginkgo Class A Common Stock that holders of Zymergen Common Stock will be entitled to receive at the Effective Time of the Merger may vary significantly from the market value of the shares of Ginkgo Class A Common Stock that holders of Zymergen Common Stock would have received if the Merger were completed on the dates shown in the table above.

 

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RISK FACTORS

In addition to the other information contained or incorporated by reference into this proxy statement/prospectus, including the matters addressed in “Special Note Regarding Forward-Looking Statements,” Zymergen stockholders should carefully consider the following risk factors in determining whether to vote for the adoption of the Merger Agreement. You should also read and consider the risk factors associated with each of the businesses of Zymergen and Ginkgo because these risk factors may affect the business operations and financial results of the combined company. Risk factors relating to Zymergen’s business may be found under Part I, Item 1A, “Risk Factors”, in Zymergen’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 2022 and June 30, 2022, as updated from time to time by Zymergen’s subsequent filings with the SEC which are incorporated by reference into this proxy statement/prospectus. A description of risk factors relating to the business of Ginkgo is contained herein. Risks related to Ginkgo, including risks related to Ginkgo’s business, financial position, development, regulatory approval, dependence on third parties, and intellectual property will continue to be applicable to the combined company after the consummation of the Merger.

Risks Relating to the Merger

The failure to complete the Merger in a timely manner, or at all, may adversely affect the business and financial results of Ginkgo and Zymergen and their respective stock prices.

Each of Ginkgo’s and Zymergen’s obligations to consummate the Merger are subject to the satisfaction or waiver of certain conditions, including, (i) the Merger Agreement must be adopted by the requisite vote of Zymergen stockholders; (ii) the expiration or termination of any applicable waiting period (or extensions thereof under the HSR Act (which waiting period expired on September 7, 2022); (iii) the absence of any temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction enjoining or otherwise prohibiting the consummation of the Merger or any applicable law of a governmental authority of competent jurisdiction prohibiting or rendering illegal the consummation of the Merger; (iv) subject to certain qualifications, the accuracy of the respective representations and warranties of Ginkgo and Zymergen and compliance by the parties with their respective obligations under the Merger Agreement; (v) the registration statement of which this proxy statement/prospectus forms a part has been declared effective by the SEC, and remains in effect; and (vi) the absence of any material adverse effect with respect to Ginkgo or Zymergen since the date of the Merger Agreement that is continuing, among others, Ginkgo and Zymergen cannot provide assurance that these or the other conditions to the completion of the Merger will be satisfied in a timely manner or at all.

In addition, Ginkgo’s obligation to consummate the Merger is also subject to the satisfaction or waiver of the condition that (i) Zymergen has not incurred or otherwise become liable for additional costs, expenses or liabilities to Zymergen or its subsidiaries with respect to its leased real property not contemplated under a specified schedule outlining its real estate plans and (ii) certain specified litigation matters are not reasonably expected to result in future money damages payable by Zymergen or its subsidiaries (in excess of any applicable insurance deductible and coverage amounts), where, the aggregate of clauses (i) and (ii), exceed $25,000,000.

Furthermore, other factors may affect when and whether the Merger will occur. If the Merger is not completed, Ginkgo’s and Zymergen’s stock price could fall to the extent that such current stock prices reflect an assumption that the Merger will be completed. Furthermore, if the Merger is not completed and the Merger Agreement is terminated, Ginkgo and Zymergen may suffer other consequences that could adversely affect such entity’s business, results of operations and stock price, including the following:

 

   

each of Ginkgo and Zymergen have incurred and will continue to incur costs relating to the Merger (including significant legal and financial advisory fees) and many of these costs are payable by Ginkgo and Zymergen whether or not the Merger is completed;

 

   

Ginkgo or Zymergen could be required to pay the other party a termination fee under certain circumstances if the Merger Agreement is terminated and the Merger is not completed;

 

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matters relating to the Merger (including integration planning) may require substantial commitments of time and resources by Ginkgo’s and Zymergen’s management teams, which could otherwise have been devoted to other opportunities that may have been beneficial to Ginkgo and Zymergen;

 

   

Ginkgo and Zymergen may be subject to legal proceedings related to the Merger or the failure to complete the Merger; and

 

   

the failure to consummate the Merger may result in negative publicity and a negative impression of Ginkgo and Zymergen in the investment community.

Ginkgo and Zymergen must obtain certain regulatory consents and approvals to consummate the Merger, which, if delayed, not granted or granted with burdensome or unacceptable conditions, could prevent, substantially delay or impair consummation of the Merger, result in additional expenditures of money and resources or reduce the anticipated benefits of the Merger.

The completion of the Merger is subject to the expiration or termination of all waiting periods (and any agreed upon extensions of any waiting period or commitment not to consummate the Merger for any period of time) applicable to the consummation of the Merger under the HSR Act, the absence of any agreement pending or in effect between Ginkgo and any governmental entity not to close, and the receipt of certain additional regulatory consents and approvals. The applicable waiting period under the HSR Act expired on September 7, 2022.

At any time before or after consummation of the Merger, notwithstanding the expiration or termination of the applicable waiting period under the HSR Act, the DOJ or the FTC, could take such action under antitrust or competition laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger.

Any one of these requirements, limitations, costs, divestitures or restrictions imposed by antitrust authorities could jeopardize or delay the completion, or reduce the anticipated benefits, of the Merger. There is no assurance that Ginkgo and Zymergen will obtain all required regulatory consents or approvals on a timely basis, or at all. Failure to obtain the necessary consents and approvals could substantially delay or prevent the consummation of the Merger, which could negatively impact both Ginkgo and Zymergen.

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Ginkgo or Zymergen.

Upon closing of the Merger, each share of Zymergen Common Stock will be converted into the right to receive the Exchange Ratio of 0.9179 of a share of Ginkgo Class A Common Stock, with cash paid in lieu of any fractional shares. This Exchange Ratio is fixed in the Merger Agreement and will not be adjusted for changes in the market price of either Ginkgo Class A Common Stock or Zymergen Common Stock. Because the Exchange Ratio will not be adjusted for changes in the market price of Ginkgo Class A Common Stock, the market value of the shares of Ginkgo Class A Common Stock that holders of Zymergen Common Stock will be entitled to receive at the Effective Time may vary significantly from the market value of the shares of Ginkgo Class A Common Stock that holders of Zymergen Common Stock would have received if the Merger had been completed on any other date, including the date of the Merger Agreement. In addition, Ginkgo will issue a number of shares of Ginkgo Class A Common Stock in the Merger based on the number of shares of Zymergen Common Stock outstanding as of the Effective Time, which may result in fluctuations in the market price of Ginkgo Class A Common Stock, including a stock price decline. The amount of shares of Ginkgo Class A Common Stock issued in the Merger will not change based on the price of the shares of Ginkgo Class A Common Stock or Zymergen Common Stock as of the Effective Time or their relative price.

The Merger Agreement does not provide for any termination right by either Ginkgo or Zymergen solely based on changes in the price or trading volume of Ginkgo Class A Common Stock or Zymergen Common Stock.

 

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Because the Merger will be completed after the date of the Special Meeting, at the time of the Special Meeting, you will not know the exact market value of the Ginkgo Class A Common Stock that Zymergen stockholders and certain other Zymergen equityholders will receive upon completion of the Merger.

Uncertainty about the Merger may adversely affect the respective business and stock price of Ginkgo and Zymergen, whether or not the Merger is completed.

Each of Ginkgo and Zymergen are subject to risks in connection with the announcement and pendency of the Merger, including the pendency and outcome of any legal proceedings against Ginkgo and Zymergen, their respective directors and others relating to the Merger and the risks from possibly foregoing opportunities Ginkgo and Zymergen might otherwise pursue absent the proposed Merger. Furthermore, uncertainties about the Merger may cause current and prospective employees of Ginkgo and Zymergen to experience uncertainty about their future with their respective companies. These uncertainties may impair Ginkgo’s and Zymergen’s ability to retain, recruit or motivate key management and other personnel.

In addition, in response to the announcement of the proposed Merger, Ginkgo’s and Zymergen’s existing or prospective customers, suppliers or collaboration partners may:

 

   

delay, defer or cease purchasing products from, or providing goods or services to, Ginkgo and Zymergen;

 

   

delay or defer other decisions concerning Ginkgo and Zymergen, or refuse to extend credit terms to Ginkgo and Zymergen;

 

   

cease further joint development activities; or

 

   

otherwise seek to change the terms on which they do business with Ginkgo and Zymergen.

While Ginkgo and Zymergen are attempting to address these risks, their respective existing and prospective customers, suppliers or collaboration partners may be reluctant to purchase Ginkgo’s and Zymergen’s products, supply Ginkgo and Zymergen with goods and service or continue collaborations due to the potential uncertainty about the direction of Ginkgo’s and Zymergen product offerings and the support and service of Ginkgo’s and Zymergen’s products after the completion of the Merger.

While the Merger is pending, Zymergen is subject to contractual restrictions that could harm its business, operating results and stock price.

The Merger Agreement includes restrictions on the conduct of Zymergen’s business prior to the completion of the Merger, generally requiring Zymergen to conduct its businesses in the ordinary course, consistent with past practice, and restricting Zymergen from taking certain specified actions absent Ginkgo’s prior written consent. See “The Merger Agreement—Conduct of Business Pending the Merger” beginning on page 154 of this proxy statement/prospectus. Zymergen may find that these and other obligations in the Merger Agreement may delay or prevent Zymergen from or limit its ability to respond effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if Zymergen’s management and the Zymergen Board think they may be advisable. These restrictions could adversely impact Zymergen’s business, operating results and stock price and its perceived acquisition value, regardless of whether the Merger is completed.

The Merger Agreement limits Zymergen’s ability to pursue alternative transactions which could deter a third party from proposing an alternative transaction.

The Merger Agreement contains provisions that, subject to certain exceptions, limit Zymergen’s ability to solicit, initiate, knowingly encourage or knowingly facilitate or engage or participate in any negotiations or discussions regarding, or furnish any nonpublic information in response to inquiries with respect to, an

 

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alternative transaction and would require Zymergen to pay a termination fee if Zymergen accepts a Superior Proposal, willfully and materially breaches its no solicitation obligations or the Zymergen Board withdraws or changes its recommendation of the Merger to the Zymergen stockholders. See “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation” beginning on page 146 of this proxy statement/prospectus. It is possible that these or other provisions in the Merger Agreement might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the outstanding shares of Zymergen Common Stock from considering or proposing an acquisition or might result in a potential competing acquirer proposing to pay a lower per share price to acquire Zymergen Common Stock than it might otherwise have proposed to pay.

The Merger will involve substantial costs.

Ginkgo and Zymergen have incurred and expect to continue to incur substantial costs and expenses relating directly to the Merger and the issuance of Ginkgo Class A Common Stock in connection with the Merger, including, as applicable, fees and expenses payable to financial advisors, other professional fees and expenses, insurance premium costs, fees and costs relating to regulatory filings and notices, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. Ginkgo also will incur significant transaction fees and costs in connection with its formulating and implementing integration plans with respect to the two companies. Ginkgo continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Merger and the integration of the two companies’ businesses. In addition, if the Merger is not completed, Ginkgo and Zymergen will have incurred substantial expenses for which no ultimate benefit will have been received by either company.

The fairness opinion obtained by the Zymergen Board from its financial advisor will not be updated to reflect changes in circumstances between signing the Merger Agreement and the completion of the Merger.

The Zymergen Board has not obtained an updated fairness opinion as of the date of this proxy statement/prospectus from Cowen, its financial advisor. Changes in the operations and prospects of Ginkgo or Zymergen, general market and economic conditions, and other factors that may be beyond the control of Ginkgo and Zymergen and on which the fairness opinion was based, may alter the value of Ginkgo or Zymergen or the price of Ginkgo Class A Common Stock or Zymergen Common Stock by the time the Merger is completed.

The fairness opinion does not speak as of the time the Merger will be completed or as of any date other than the date of such opinion. Zymergen does not anticipate asking Cowen to update its fairness opinion. The fairness opinion of Cowen is included as Annex E to this proxy statement/prospectus. For a description of the fairness opinion that the Zymergen Board received from Cowen and a summary of the material financial analyses it provided to the Zymergen Board in connection with rendering such opinion, see “The Merger—Opinion of Financial Advisor to Zymergen” beginning on page 121 of this proxy statement/prospectus.

For a description of the factors considered by the Zymergen Board in determining to approve the Merger, see “The Merger—Recommendation of the Zymergen Board and Zymergen’s Reasons for the Merger” beginning on page 115 of this proxy statement/prospectus.

Certain directors and executive officers of Zymergen may have interests in the Merger that are or were different from, or in conflict with or in addition to, those of Zymergen’s stockholders generally.

In considering whether to approve the proposals at the Special Meeting, Zymergen stockholders should recognize that directors and officers of Zymergen have interests in the Merger that may differ from, or that are in addition, to their interests as stockholders of Zymergen. The Zymergen Board was aware of these interests at the time it approved the Merger Agreement. These interests may cause Zymergen’s directors and officers to view the Merger differently from how you may view it as a stockholder. For a description of the factors considered by the Zymergen Board in determining to approve the Merger, see “The Merger—Interests of Zymergen’s Directors and Executive Officers in the Merger” beginning on page 131 of this proxy statement/prospectus.

 

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As of the Record Date, Zymergen directors, executive officers, and their respective affiliates, as a group, beneficially held and were entitled to vote 17,539,435 shares of Zymergen Common Stock, representing 16.8% of the voting power of Zymergen. Zymergen’s directors and executive officers have informed Zymergen that they currently intend to vote all of their respective shares of Zymergen Common Stock “FOR” the Merger Proposal and “FOR” the Adjournment Proposal.

Holders of Zymergen Common Stock will not be entitled to appraisal rights in the Merger.

Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction.

Under Section 262(b) of the DGCL, stockholders do not have appraisal rights if the shares of stock they hold, as of the record date for determination of stockholders entitled to vote at the meeting of shareholders to act upon a merger, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders are required by the terms of the merger agreement to receive in exchange for their shares in the merger anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Because Zymergen stockholders will receive only shares of Ginkgo Class A Common Stock which will be listed on the NYSE and cash in lieu of any fractional shares, Zymergen stockholders will not have any appraisal rights. See “The Merger—No Appraisal Rights” beginning on page 139 of this proxy statement/prospectus.

Ginkgo or Zymergen may waive one or more of the closing conditions without re-soliciting stockholder approval from Zymergen stockholders.

To the extent permitted by law, Ginkgo or Zymergen may determine to waive, in whole or part, one or more of the conditions to their respective obligations to consummate the Merger. Zymergen expects to evaluate the materiality of any waiver and its effect on Zymergen stockholders in light of the facts and circumstances at the time to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination as to whether to waive any condition to the consummation of the Merger, and as to whether to re-solicit stockholder approval and/or amend this proxy statement/prospectus as a result of such waiver, will be made by Ginkgo and Zymergen at the time of such waiver based on the facts and circumstances as they exist at that time.

After the Merger, Zymergen stockholders will have a significantly lower ownership and voting interest in Ginkgo than they currently have in Zymergen and will exercise less influence over management and policies of the combined company.

Based on the estimated number of shares of Zymergen Common Stock and Ginkgo Class A Common Stock outstanding on July 22, 2022, the last trading day before the public announcement of the Merger Agreement, Zymergen and Ginkgo estimate that, upon completion of the Merger, former Zymergen stockholders and certain other Zymergen equityholders will own approximately 5.25% of Ginkgo on a fully diluted basis. Consequently, former Zymergen stockholders will have less influence over the management and policies of the combined company than they currently have over the management and policies of Zymergen.

Zymergen and Ginkgo may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. For example, alleged Zymergen shareholders filed individual actions in federal

 

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court against Zymergen and its board of directors or made a demand in connection with the Merger. It alleges violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 and seeks injunctive relief, damages, and fees. Even if the lawsuits are without merit, defending against these claims could result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Zymergen’s and Ginkgo’s respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, or from being completed within the expected timeframe, which may adversely affect Zymergen’s and Ginkgo’s respective business, financial position and results of operations.

Risks Related to Ginkgo Following the Merger

Ginkgo may fail to realize the benefits and synergies expected from the Merger, which could adversely affect its stock price.

The anticipated benefits and synergies Ginkgo expects from the Merger are, necessarily, based on projections and assumptions about the combined businesses of Ginkgo and Zymergen, which may not materialize as expected or which may prove to be inaccurate. The value of Ginkgo Class A Common Stock following the completion of the Merger could be adversely affected if Ginkgo is unable to realize the anticipated benefits and synergies from the Merger on a timely basis or at all. The benefits and synergies expected from the Merger which may not materialize or may prove to be inaccurate include the following:

 

   

productivity improvements and corresponding decreases in unit costs as a result of Zymergen’s robotic automation and material conveyance technology;

 

   

ability to accelerate scaling efforts while minimizing incremental run-rate operating expenses;

 

   

acceleration of Ginkgo’s software development goals, including higher utilization and efficiency, due to Zymergen’s software and data stack;

 

   

improvements in the quality of Ginkgo’s codebase design;

 

   

increased probability of success and lower costs for customers;

 

   

increased strain engineering expertise as knowledgeable Zymergen employees become Ginkgo employees; and

 

   

a pro forma cost structure that is materially less than the combined standalone cost structure of Ginkgo and Zymergen.

Ginkgo cannot predict with certainty if or when these benefits and synergies will be realized, or the extent to which they will actually be achieved. Realization of any benefits or synergies could be affected by the factors described in other risk factors and a number of factors beyond Ginkgo’s control, including, without limitation, general economic conditions, increased operating costs and regulatory developments

Ginkgo may be unable to appropriately integrate the business, operations and assets of Zymergen into its existing business.

Achieving the benefits of the Merger will depend, in part, on Ginkgo’s ability to integrate the business, operations and assets of Zymergen successfully and efficiently with its business. The challenges involved in this integration, which will be complex and time-consuming, include the following:

 

   

difficulties integrating new and existing technologies, systems and processes into Ginkgo’s platform and operations;

 

   

successfully managing relationships with the combined supplier and customer base of Ginkgo and Zymergen;

 

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coordinating and integrating independent research and development and engineering teams across product platforms while reducing costs;

 

   

consolidating and integrating processes, procurement, research, development and engineering activities, customer and technical support and management and administrative functions;

 

   

the ability to complete the potential sale or spin-out of Zymergen’s advanced materials and drug discovery businesses on favorable terms or at all;

 

   

coordinating sales and marketing efforts to effectively position Ginkgo’s capabilities and the direction of its platform;

 

   

limitations prior to the completion of the Merger on the ability of management of Ginkgo and Zymergen to conduct planning regarding the integration of the two companies;

 

   

limitations or encumbrances on certain Zymergen intellectual property or other difficulties integrating Zymergen intellectual property into Ginkgo’s portfolio;

 

   

the increased scale and complexity of Ginkgo’s operations resulting from the Merger;

 

   

managing Zymergen’s real estate cost commitments;

 

   

retaining key employees of Ginkgo and Zymergen;

 

   

integrating and managing Ginkgo’s other pending acquisitions in addition to the Merger; and

 

   

minimizing the diversion of Ginkgo’s management’s attention from other important business objectives.

If Ginkgo does not successfully manage these issues and the other challenges inherent in integrating an acquired business of the size and complexity of Zymergen, then Ginkgo may not achieve the anticipated benefits of the Merger and its revenue, expenses, operating results and financial condition could be materially adversely affected.

The acquisition of Zymergen may result in significant charges or other liabilities that could adversely affect the financial results of the combined company.

The financial results of the combined company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with Ginkgo’s integration of the business and operations of Zymergen. The amount and timing of these possible charges are not yet known. Further, Ginkgo’s failure to identify or accurately assess the magnitude of certain liabilities, including in connection with Zymergen’s pending legal proceedings and Zymergen’s real estate cost commitments, it is assuming in the Merger could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on Ginkgo’s business, operating results or financial condition. The price of Ginkgo Class A Common Stock following the Merger could decline to the extent the combined company’s financial results are materially affected by any of these events.

The unaudited pro forma condensed combined financial information for Ginkgo included in this proxy statement/prospectus is preliminary, and the actual financial position and operations of Ginkgo after the Merger may differ materially from the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus.

The unaudited pro forma condensed combined financial information for Ginkgo included in this proxy statement/prospectus is presented for illustrative purposes only and is based on assumptions and estimates considered appropriate by Ginkgo’s management; however, it does not necessarily reflect what the combined company’s financial condition or results of operations would have been had the Merger been completed on the dates assumed. Ginkgo’s actual results and financial position after the Merger may differ materially and

 

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adversely from the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments, which are preliminary and may be revised. The unaudited pro forma condensed combined financial information does not consider any impacts of integration costs, potential revenue enhancements, anticipated cost savings and expense efficiencies, or other synergies that may result from the Merger or any strategies that management may consider in order to continue to efficiently manage Zymergen’s operations. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Zymergen as of the date of the completion of the Merger. Further, Ginkgo expects to recognize a significant amount of additional goodwill and long-lived intangibles in the Merger. Such goodwill and intangibles will be subject to impairment assessments and a material charge may be necessary if the results of operations and cash flows are unable to support the goodwill initially recognized subsequent to the Merger. For more information see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 296 of this proxy statement/prospectus.

Ginkgo’s future results will suffer if it does not effectively manage its expanded operations and geographic footprint following the Merger.

Following the Merger, the size and scope of operations of the business of the combined companies will increase beyond the current size and scope of operations of either Ginkgo’s or Zymergen’s current businesses. In addition, Ginkgo may continue to expand its size and operations through additional acquisitions or other strategic transactions. Ginkgo’s future success depends, in part, upon its ability to manage its expanded business, which may pose substantial challenges for its management, including challenges related to the management and monitoring of new operations and locations and associated increased costs and complexity. There can be no assurances that Ginkgo will be successful in managing such expanded business or that it will realize the expected economies of scale, synergies and other benefits currently anticipated from the Merger or anticipated from any additional acquisitions or strategic transactions.

The market price of Ginkgo Class A Common Stock after completion of the Merger will continue to fluctuate, and may be affected by factors different from those affecting shares of Zymergen Common Stock currently.

Upon completion of the Merger, holders of Zymergen Common Stock will become holders of Ginkgo Class A Common Stock. The business of Ginkgo differs from that of Zymergen in important respects, and, accordingly, the results of operations of Ginkgo after the Merger, as well as the market price of Ginkgo Class A Common Stock, may be affected by factors different from those currently affecting the results of operations of Zymergen. As a result of the Merger, Zymergen will be part of a larger company with other lines of business, such that decisions affecting Zymergen may be made in respect of the larger combined business as a whole rather than the Zymergen business individually. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, Ginkgo Class A Common Stock, regardless of Ginkgo’s actual operating performance. For further information on the businesses of Ginkgo and Zymergen and certain factors to consider in connection with those businesses, see the documents incorporated by reference or included in this proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus, “Incorporation of Certain Information by Reference” beginning on page 317 of this proxy statement/prospectus and “Information about Ginkgo” beginning on page 166 of this proxy statement/prospectus.

The combined company may not be able to retain customers, suppliers or distributors, or customers, suppliers or distributors may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with Ginkgo or Zymergen.

As a result of the Merger, the combined company may experience impacts on relationships with customers, suppliers and distributors that may harm the combined company’s business and results of operations. Certain

 

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customers, suppliers or distributors 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 customers, suppliers and distributors will remain with or continue to have a relationship with the combined company or do so on contractual terms amenable to Ginkgo following the Merger. If any customers, suppliers or distributors 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. Furthermore, the combined company will not have long-term arrangements with many of its significant suppliers. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

Zymergen (or certain of its subsidiaries) also has contracts with vendors, landlords and other business partners which may require Zymergen (or certain of its subsidiaries) to obtain consent from or provide notice to these other parties in connection with the Merger, or which may otherwise contain limitations applicable to such contracts following the Merger. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs and lose rights that may be material to the combined company’s business. In addition, third parties with whom Ginkgo and Zymergen currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the Merger. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Merger. The adverse effect of any such disruptions could also be exacerbated by a delay in the completion of the Merger or by a termination of the Merger Agreement.

Risks Related to Ginkgo

Risks Related to Ginkgo’s Business

Ginkgo has a history of net losses. Ginkgo expects to continue to incur losses for the foreseeable future, and may never achieve or maintain profitability.

Ginkgo has incurred significant operating losses since its inception. Net loss attributable to Ginkgo’s stockholders was approximately $668.8 million and $1,259.3 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, Ginkgo had an accumulated deficit of approximately $3,557.3 million. Ginkgo may incur losses and negative cash flow from operating activities for the foreseeable future as it continues to invest significant additional funds toward further developing its platform, the cell programs Ginkgo performs on behalf of its customers and otherwise growing its business, including Ginkgo’s biosecurity offering. Ginkgo’s operating expenses have increased as a result of becoming a public company, and Ginkgo expects operating expenses will continue to increase as it grows its business. Ginkgo has derived a significant portion of its revenues from fees and milestone payments from technical development services provided to customers to advance programs, as well as a significant portion of revenues from its biosecurity offering. Historically, these fees have not been sufficient to cover the full cost of operations. Additionally, if Ginkgo’s customers terminate their agreements or development plans, Ginkgo’s near-term revenues could be adversely affected. In addition, certain customer agreements provide for milestone payments, future royalties and other forms of contingent consideration, the payment of which are uncertain, as they are dependent on Ginkgo’s ability to successfully develop engineered cells, bioprocesses, or other deliverables and customers’ ability and willingness to successfully develop and commercialize products and processes.

Expenses may exceed revenues for the foreseeable future and Ginkgo may not achieve profitability. If Ginkgo fails to achieve profitability, or if the time required to achieve profitability is longer than anticipated, Ginkgo may not be able to expand or continue its business, and the value of Ginkgo Class A Common Stock could be negatively impacted. Ginkgo’s ability to achieve or sustain profitability is based on numerous factors, many of which are beyond Ginkgo’s control, including the development of its platform, the initiation of new programs with new and existing customers, the commercial terms of its programs, the ability to advance cell engineering programs in a timely and cost-effective manner, the ability to extend new offerings to customers,

 

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Ginkgo’s customers’ ability to scale up bioprocesses, the ability of Ginkgo’s customers to produce and sell products, the impact of market acceptance of Ginkgo’s customers’ products, and Ginkgo’s customers’ market penetration and margins. Even if Ginkgo achieves profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

Ginkgo may need substantial additional capital in the future in order to fund its business.

Ginkgo has consumed considerable amounts of capital to date, and expects to incur continued net losses over the next several years as it continue to develop its business, advance programs, expand and enhance its platform, and make the capital investments necessary to scale up the Foundry operations and Codebase assets (each as defined below). Ginkgo may also use additional capital for its biosecurity offering, strategic investments and acquisitions. Ginkgo believes that its cash and cash equivalents, short-term investments, and interest earned on investments will be sufficient to meet projected operating requirements for several years and until reaching profitability. However, these assumptions may prove to be incorrect and could exhaust its available capital resources sooner than Ginkgo currently expects. Because of the numerous risks and uncertainties associated with the programs, including risks and uncertainties that could impact the rate of progress of the programs, Ginkgo is unable to estimate with certainty the amounts of capital outlays and operating expenditures associated with these activities.

Ginkgo does not currently have any commitments for future funding, and may receive fees, milestones, and royalty payments under its customer agreements, but these are not guaranteed. Additionally, Ginkgo may be able to sell equity interests in certain subsidiaries or collaborations but most of these equity stakes are illiquid (e.g., in private companies) and Ginkgo may not be able to find a buyer or may incur significant impairment if forced to sell these positions for liquidity. Ginkgo may not receive any further funds under those agreements, the funds it receives may be lower than projected, or the program costs may be higher than projected. In addition, Ginkgo may not be able to sign new customer agreements or enter into new development plans with existing customers with adequate funds to cover program development expenses. As a result of these and other factors, Ginkgo does not know whether additional financing will be available when needed, or, if available, whether such financing would be on terms favorable to Ginkgo or its stockholders.

If future financings involve the issuance of equity securities, existing stockholders would suffer dilution. If Ginkgo raises debt financing in the future, it may be subject to restrictive covenants that limit ability to conduct business. Ginkgo’s ability to raise funds may be adversely impacted by current or future economic conditions. If Ginkgo fails to raise sufficient funds and continues to incur losses, its ability to fund operations, take advantage of strategic opportunities, or otherwise respond to competitive pressures could be significantly limited. If adequate funds are not available, Ginkgo may not be able to successfully execute its business plan or continue its business.

Ginkgo has experienced rapid growth and expects growth to continue, and if Ginkgo fails to effectively manage its growth, then its business, results of operations, and financial condition could be adversely affected.

Ginkgo has experienced substantial growth in its business since inception, which has placed and may continue to place significant demands on company culture, operational infrastructure, and management. Ginkgo believes that its culture has been a critical component of its success. Ginkgo has invested substantial time and resources in building its team and nurturing a culture of empowerment of, and active engagement by, its employees. As Ginkgo expands its business and matures as a public company, Ginkgo may find it difficult to maintain its culture while managing this growth. Any failure to manage anticipated growth and organizational changes in a manner that preserves the key aspects of Ginkgo’s culture could be detrimental to future success, including its ability to recruit and retain personnel, and effectively focus on and pursue its objectives. This, in turn, could adversely affect Ginkgo’s business, results of operations, and financial condition.

In addition, in order to successfully manage rapid growth, Ginkgo’s organizational structure has become more complex and is likely to continue to become more complex. In order to manage these increasing

 

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complexities, Ginkgo will need to continue to scale and adapt its operational, financial, and management controls, as well as its reporting systems and procedures. The expansion of Ginkgo’s systems and infrastructure will require commitment to substantial financial, operational, and management resources before revenue increases and without any assurances that revenue will increase.

Finally, continued growth could strain Ginkgo’s ability to maintain reliable service levels and offerings for its customers. If Ginkgo fails to achieve the necessary level of capacity, quality and efficiency in performing services and other development activities, or the necessary level of efficiency in organizational structure as it grows, then its business, results of operations, and financial condition could be adversely affected.

Ginkgo’s limited operating history makes it difficult to evaluate its current business and future prospects.

Ginkgo has a portfolio of cell engineering programs which vary in start date, duration, complexity, and revenue potential. Additionally, Ginkgo’s downstream economics in the form of equity interests, milestone payments, or royalty streams add an additional level of uncertainty to possible future performance. Consequently, predictions about future success or viability are highly uncertain and may not be as accurate as they could be if Ginkgo had a longer company history of successfully developing, commercializing and generating revenue from its programs and/or downstream economic participation. With respect to Ginkgo’s biosecurity offering, prior to 2020, Ginkgo had no experience developing or commercializing testing services. Moreover, as described above, given the limited operating history of its biosecurity offering, Ginkgo’s reliance on government funding for testing, potential disruptions from vaccine rollout generally, the availability of COVID-19 therapeutics, the impact of summer vacation and other school breaks, and the increased availability of over-the-counter testing options, the future performance of Ginkgo’s COVID-19 testing program is unpredictable. Moreover, Ginkgo cannot predict how long the COVID-19 pandemic will continue and, therefore, cannot predict the duration of the revenue stream, which could diminish significantly, from COVID-19 testing services.

Ginkgo’s long-term objective is to generate free cash flow from the commercialization of programs by customers across a variety of industries, as well as from its biosecurity-focused offerings. Estimated costs and timelines for the completion of programs are based on Ginkgo’s experiences to date and expectations for each stage of the program in development. Given the variety of types of programs Ginkgo supports and the continued growth of its platform, there is variability in timelines and costs for launching and executing programs, and completion dates can change over the course of a customer engagement. In addition, costs and timelines may be greater or subject to variability where regulatory requirements lead to longer timelines, such as in agriculture, food, and therapeutics. In addition, Ginkgo has equity interests in certain companies and there is and will continue to be variability in the financial performance of these other companies or future companies in which it may have equity interests.

As a business with a limited operating history, Ginkgo may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown obstacles. Ginkgo has encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in emerging and rapidly changing industries. If assumptions regarding these risks and uncertainties, which Ginkgo used to plan and operate its business, are incorrect or change, or if Ginkgo does not address these risks successfully, its results of operations could differ materially from expectations, and its business, financial condition, and results of operations could be adversely affected.

If Ginkgo cannot maintain and expand current customer partnerships and enter into new customer partnerships, its business could be adversely affected.

Ginkgo does not generate substantial revenue from its own products, and instead generates revenue from customer collaborations in which Ginkgo provides services, and also receives downstream value in the form of royalties, equity, or milestone payments. As a result, Ginkgo’s success depends on its ability to expand the number, size and scope of customer collaborations. Ginkgo’s ability to win new business depends on many

 

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factors, including reputation in the market, the quality of service offerings relative to alternatives, the pricing and efficiency of services relative to alternatives, and technical capabilities. If Ginkgo fails to maintain a position of strength in any of these factors, its ability to either sign new customer collaborations or launch new programs with existing customers may suffer and this could adversely affect its prospects. Additionally, in the process of developing programs, Ginkgo generates Foundry know-how and accumulates meaningful biological and data assets, including optimized proteins and organisms, characterized genetic parts, enhanced understanding of metabolic pathways, biological, chemical, and genetic libraries, and other elements of biological data. Data and know-how generated from programs provide the basis for expanded capabilities that Ginkgo believes further supports customer collaborations. As a result, in addition to reducing revenue or delaying the development of programs, the loss of one or more of Ginkgo’s customer relationships or the failure to add new customers or programs may hinder Ginkgo’s accumulation of such information, thus hindering efforts to advance technological differentiation and improve Ginkgo’s platform.

Ginkgo engages in conversations with companies regarding potential customer collaborations on an ongoing basis. Ginkgo may spend considerable time and money engaging in these conversations and feasibility assessments, including understanding the technical approach to a program, customer concerns and limitations, and legal or regulatory landscape of a potential program or offering, which may not result in a commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful for many reasons, including Ginkgo’s inability to complete a program to the customers’ specifications or within the customers’ time frames, or unsuccessful development or commercialization of products or processes by Ginkgo’s customers. In such circumstances, Ginkgo’s revenues and downstream value potential from such a collaboration might be meaningfully reduced.

Ginkgo currently owns and may in the future own equity interests in other operating companies, including certain of its customers; consequently, Ginkgo has exposure to the volatility and liquidity risks inherent in holding its equity and overall operational and financial performance of its businesses.

Ginkgo currently owns equity interests in several of its customers. In the future, Ginkgo may also own equity interests in other companies. The process by which Ginkgo receives equity interests and the factors considered in deciding whether to accept, hold or dispose of these equity positions may differ significantly from those that an independent investor would evaluate when considering equity interests in a company. Owning equity increases exposure to the risks of the other company and, in the case of customers, beyond the products of Ginkgo’s collaborations. Ginkgo’s equity ownership positions expose it to market volatility and the potential for negative returns. Ginkgo may have restrictions on resale or limited markets to sell equity ownership. In many cases, an equity position is a minority position which exposes Ginkgo to further risk, as Ginkgo is not able to exert control over the companies in which it holds securities.

In connection with future collaborations or joint ventures, Ginkgo may, from time to time, receive warrants or options, all of which involve special risks. To the extent Ginkgo receives warrants or options in connection with future collaborations or joint ventures, it would be exposed to risks involving pricing differences between the market value of underlying securities and the exercise price for the warrants or options, a possible lack of liquidity, and the related inability to close a warrant or option position, all of which could ultimately have an adverse effect on Ginkgo’s financial position.

Ginkgo leverages its own resources and partners with strategic and financial investors in order to help early stage companies and innovators secure funding and benefit from its platform, which exposes Ginkgo to a number of risks.

Since Ginkgo’s founding, it has helped to launch new companies (such as BiomEdit, LLC, Motif FoodWorks, Inc., Allonnia, LLC, Arcaea, LLC (formerly known as Kalo Ingredients, LLC), Ayana Bio, LLC, Joyn Bio LLC and Verb Biotics, LLC) by bringing together strategic and financial investors to secure funding for these early stage and small companies. Going forward, Ginkgo intends to continue to leverage its balance sheet and partner with investors to enable companies at all stages to benefit from its platform.

 

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Partnering with and investing in early stage and small companies may expose Ginkgo to a number of risks, including that early stage and small companies may have:

 

   

shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render small companies more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

 

   

more limited access to capital and higher funding costs, may be in a weaker financial position and may need more capital than originally anticipated to expand, compete and operate their business;

 

   

the inability to obtain financing from the public capital markets or other traditional sources, such as commercial banks, in part because loans made to these types of companies entail higher risks than loans made to companies that have larger businesses, greater financial resources or are otherwise able to access traditional credit sources on more attractive terms;

 

   

a higher likelihood of depending on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on such company and, in turn, on Ginkgo;

 

   

less predictable operating results, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;

 

   

particular vulnerabilities to changes in customer preferences and market conditions, depend on a limited number of customers, and face intense competition, including from companies with greater financial, technical, managerial and marketing resources; and

 

   

fewer administrative resources, which can lead to greater uncertainty in their ability to generate accurate and reliable financial data, including their ability to deliver audited financial statements.

Any of these factors or changes thereto could impair an early stage or small company’s financial condition, results of operation, cash flow or result in other adverse events, such as bankruptcy. This, in turn, could result in losses in Ginkgo’s investments and a change in Ginkgo’s income (loss) on investments.

Ginkgo may be unable to complete pending strategic acquisitions or successfully integrate strategic acquisitions which could adversely affect its business and financial condition.

Ginkgo’s inability to complete any pending strategic acquisitions or to successfully integrate any new or previous strategic acquisitions could have a material adverse effect on its business. Ginkgo’s business strategy includes the acquisition of technologies and businesses that complement or augment its existing products and services. Ginkgo may continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to its existing strengths. There are no assurances, however, that any strategic acquisition opportunities will arise or, if they do, that they will be consummated. Certain acquisitions may be difficult to complete for a number of reasons, including the need to satisfy customary closing conditions, the need for antitrust and/or other regulatory approvals, as well as disputes or litigation. For example, this Merger and the pending acquisition of Bayer Cropscience LP (“Bayer”) are subject to a number of closing conditions, as described further in the notes to Ginkgo’s consolidated financial statements included on page F-1 of this proxy statement/prospectus. Any strategic acquisition Ginkgo may complete may be made at a substantial premium over the fair value of the net identifiable assets of the acquired company and thus its realization of this value relies on successful integration and continued operations. Ginkgo may not be able to integrate acquired businesses successfully into its existing businesses, make such businesses profitable, retain key employees or realize anticipated cost savings or synergies, if any, from these acquisitions, which could adversely affect its business and financial condition. Further, Ginkgo’s ongoing business may be disrupted, and its management’s attention may be diverted by acquisitions, investments, transition and/or integration activities.

 

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In addition to Ginkgo’s proposed acquisition of Zymergen, Ginkgo may pursue other strategic acquisitions and investments that are dilutive to its stockholders and that could have an adverse impact on Ginkgo’s business if they are unsuccessful.

Ginkgo has made acquisitions in the past and, as appropriate opportunities become available, Ginkgo may acquire additional businesses, assets, technologies, or products to enhance its business in the future, but Ginkgo’s ability to do so successfully cannot be ensured. Ginkgo has also made investments in companies that it views as synergistic with its business. Although Ginkgo conducts due diligence on these acquisitions and investments, such processes may underestimate or fail to reveal significant liabilities and Ginkgo could incur losses resulting from liabilities of the acquired business that are not covered by indemnification Ginkgo may obtain from the seller. Even if Ginkgo identifies suitable opportunities, including pending transactions, it may not be able to complete such acquisitions on favorable terms or at all, which could damage its business. Additionally, pursuing acquisitions, whether successful or unsuccessful, could result in civil litigation and regulatory penalties. Any acquisitions Ginkgo makes may not strengthen its competitive position, and these transactions may be viewed negatively by customers or investors. Ginkgo may decide to incur debt or spend cash in connection with a strategic acquisition, which may cause Ginkgo to face liquidity concerns or be subject to restrictive covenants in the future. Ginkgo has issued, and in the future may also issue, common stock or other equity securities to the stockholders of the acquired company, which could constitute a material portion of then-outstanding shares of common stock and may reduce the percentage ownership of existing stockholders.

In addition, Ginkgo may not be able to successfully integrate the acquired personnel, assets, technologies, products and/or operations into its existing business in an effective, timely, and non-disruptive manner or retain acquired personnel following an acquisition. Acquisitions may also divert management’s attention from day-to-day responsibilities, increasing expenses and reducing cash available for operations and other uses. In addition, Ginkgo may not be able to fully recover the costs of such acquisitions or be successful in leveraging any such strategic transactions into increased business, revenue, or profitability. Ginkgo also cannot predict the number, timing, or size of any future acquisitions or the effect that any such transactions might have on operating results.

Accordingly, although there can be no assurance that Ginkgo will undertake or successfully complete any future acquisitions, any transactions that Ginkgo does complete may not yield the anticipated benefits and may be subject to the foregoing or other risks and have a material and adverse effect on its business, financial condition, results of operations, and prospects. Conversely, any failure to pursue or delay in completing any acquisition or other strategic transaction that would be beneficial to Ginkgo, including those caused by competing parties, could delay the development of its platform or advancement of programs and, thus, potential commercialization of Ginkgo’s customer’s products.

Ginkgo’s programs may not achieve milestones and other anticipated key events on the expected timelines or at all, which could have an adverse impact on its business and could cause the price of Ginkgo Class A Common Stock to decline.

Ginkgo may adopt various technical, manufacturing, regulatory, commercial, and other objectives for its programs. These milestones may include Ginkgo’s or Ginkgo’s customers’ expectations regarding the commencement or completion of technical development, the achievement of manufacturing targets, the submission of regulatory filings, or the realization of other development, regulatory, or commercialization objectives by Ginkgo or its customers. The achievement of many of these milestones may be outside of Ginkgo’s control. All of these milestones are based on a variety of assumptions, including assumptions regarding capital resources, constraints, and priorities, progress of and results from research and development (“R&D”) activities, and other factors, including impacts resulting from the COVID-19 pandemic, any of which may cause the timing of achievement of the milestones to vary considerably. If Ginkgo, its collaborators, or its customers fail to achieve milestones in the expected timeframes, the commercialization of Ginkgo’s programs may be delayed, its credibility may be undermined, business and results of operations may be harmed, and the trading price of Ginkgo’s Class A Common Stock may decline.

 

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Ginkgo must continue to secure and maintain sufficient and stable supplies of laboratory reagents, consumables, equipment, and laboratory services. Ginkgo depends on a limited number of suppliers, some of which are single-source suppliers, and contract manufacturers for critical supplies, equipment, and services for research, development, and manufacturing of Ginkgo’s products and processes. Reliance on these third parties exposes Ginkgo to risks relating to costs, contractual terms, supply, and logistics, and the loss of any one or more of these suppliers or contract manufacturers or their failure to supply Ginkgo with the necessary supplies, equipment, or services on a timely basis, could cause delays in Ginkgo’s research, development, or production capacity and adversely affect its business.

The COVID-19 pandemic has caused substantial disruption in global supply chains and the ability of third parties to provide Ginkgo services on a timely basis or at all. As a result, Ginkgo has experienced shortages in some of its key equipment and supplies, including those required in Ginkgo’s labs, as well as disruptions in services provided by third parties, and may continue to do so in the future as a result of the pandemic, or otherwise. Ginkgo may also experience price increases, quality issues and longer lead times due to unexpected material shortages, service disruptions, and other unanticipated events, which may adversely affect supply of lab equipment, lab supplies, chemicals, reagents, supplies, and lab services. For some suppliers, Ginkgo does not enter into long-term agreements and instead secures materials and services on a purchase order basis. Suppliers may reduce or cease their supply of materials or services to Ginkgo at any time in the future. If the supply of materials or services is interrupted, Ginkgo’s programs may be delayed.

Ginkgo depends on a limited number of suppliers for critical items, including lab consumables and equipment, for the development of its programs. Some of these suppliers are single-source suppliers. Ginkgo does not currently have the infrastructure or capability internally to manufacture these items at the necessary scale or at all. Although Ginkgo has a reserve of supplies and although alternative suppliers exist for some of these critical products, services, and equipment, existing processes used in its Foundry have been designed based on the functions, limitations, features, and specifications of the products, services, and equipment that Ginkgo currently utilizes. While Ginkgo works with a variety of domestic and international suppliers, Ginkgo’s suppliers may not be obligated to supply products or services or arrangements may be terminated with relatively short notice periods. Additionally, Ginkgo does not have any control over the process or timing of the acquisition or manufacture of materials by its manufacturers and cannot ensure that they will deliver the items ordered on time, or at all.

In particular, Ginkgo relies on Twist Bioscience Corporation for custom DNA synthesis and Thermo Fisher Scientific Inc. and others for certain instruments and consumables. The price and availability of DNA, chemicals, reagents, equipment, consumables, and instruments have a material impact on Ginkgo’s ability to provide Foundry services. Ginkgo may rely on contract manufacturers like Fermic, s.a. de.c.v for scale-up fermentation development, fermentation, and manufacturing of products for some customers.

The loss of the products, services, and equipment provided by one or more suppliers could require Ginkgo to change the design of its research, development, and manufacturing processes based on the functions, limitations, features, and specifications of the replacement items or seek out a new supplier to provide these items. Additionally, as Ginkgo grows, its existing suppliers may not be able to meet the increasing demand, and Ginkgo may need to find additional suppliers. Ginkgo may not be able to secure suppliers who provide lab supplies at, or equipment and services to, the specification, quantity, and quality levels that Ginkgo demands (or at all) or be able to negotiate acceptable fees and terms of services with any such suppliers.

As described above, some lab equipment, lab consumables, and other services and materials are purchased from single-source or preferred suppliers, which limits Ginkgo’s negotiating leverage and ability to rely on additional or alternative suppliers for these items. Ginkgo’s dependence on these single-source and preferred suppliers exposes it to certain risks, including the following:

 

   

suppliers may cease or reduce production or deliveries, raise prices, or renegotiate terms;

 

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Ginkgo may be unable to locate a suitable replacement on acceptable terms or on a timely basis, if at all;

 

   

if there is a disruption to single-source or preferred suppliers’ operations, and if Ginkgo is unable to enter into arrangements with alternative suppliers, it will have no other means of continuing the relevant research, development, or manufacturing operations until they restore the affected facilities or they or Ginkgo procure alternative sources of supply;

 

   

delays caused by supply issues may harm Ginkgo’s reputation, frustrate customers, and cause them to turn to competitors for future programs; and

 

   

Ginkgo’s ability to progress the development of existing programs and the expansion of capacity to begin future programs could be materially and adversely impacted if the single-source or preferred suppliers upon which Ginkgo relies were to experience a significant business challenge, disruption, or failure due to issues such as financial difficulties or bankruptcy, issues relating to other customers such as regulatory or quality compliance issues, or other financial, legal, regulatory, or reputational issues.

Moreover, to meet anticipated market demand, suppliers may need to increase manufacturing capacity, which could involve significant challenges. This may require Ginkgo and its suppliers to invest substantial additional funds and hire and retain the technical personnel who have the necessary experience. Neither Ginkgo nor its suppliers may successfully complete any required increase to existing research, development, or manufacturing capacity in a timely manner, or at all.

For the quarter ended June 30, 2022, cost of lab equipment, lab supplies, and lab services accounted for a significant portion of total R&D expenses. In the event of price increases by suppliers, whether as a result of inflationary pressures or otherwise, Ginkgo may attempt to pass the increased costs to customers. However, Ginkgo may not be able to raise the prices of its Foundry services sufficiently to cover increased costs resulting from increases in the cost of materials and services, or the interruption of a sufficient supply of materials or services. As a result, materials and services costs, including any price increase for materials and services, may negatively impact Ginkgo’s business, financial condition, and results of operations.

Some of Ginkgo’s suppliers and contract manufacturers are foreign entities. Ginkgo may face disruptions due to the inability to obtain customs clearances in a timely manner or restrictions on shipping or international travel due to the COVID-19 pandemic. As a result of ongoing global supply chain challenges resulting in very long lead times for certain products and equipment, Ginkgo may order in larger volumes in order to secure the supplies Ginkgo requires for future operations, which may negatively impact financial conditions, especially if Ginkgo is unable to use the supplies ordered.

Ginkgo uses biological, hazardous, flammable and/or regulated materials that require considerable training, expertise and expense for handling, storage and disposal and may result in claims against Ginkgo.

Ginkgo works with biological and chemical materials that could be hazardous to human, animal, or plant health and safety or the environment. Ginkgo’s operations produce hazardous and biological waste products, and Ginkgo largely contracts with third parties for the disposal of these products. Federal, state, and local laws and regulations govern the use, generation, manufacture, storage, handling, and disposal of these materials and wastes. Compliance with applicable laws and regulations is expensive, and current or future laws and regulations may restrict operations. If Ginkgo does not comply with applicable laws and regulations, it may be subject to fines and penalties.

In addition, Ginkgo cannot eliminate the risk of (a) accidental or intentional injury or (b) release, or contamination from these materials or wastes, which could expose it to liability. Furthermore, laws and regulations are complex, change frequently, and have tended to become more stringent. Ginkgo cannot predict the impact of such changes and cannot be certain of future compliance. Accordingly, in the event of release,

 

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contamination, or injury, Ginkgo could be liable for the resulting harm or penalized with fines in an amount exceeding its resources and Ginkgo’s operations could be suspended or otherwise adversely affected. These liabilities could also include regulatory actions, litigation, investigations, remediation obligations, damage to Ginkgo’s reputation and brand, supplemental disclosure obligations, loss of customer, consumer, and partner confidence in the safety of laboratory operations, impairment to Ginkgo’s business, and corresponding fees, costs, expenses, loss of revenues, and other potential liabilities, as well as increased costs or loss of revenue or other harm to Ginkgo’s business.

The release of GMOs or Genetically Modified Materials, whether inadvertent or purposeful, into uncontrolled environments could have unintended consequences, which may result in increased regulatory scrutiny and otherwise harm Ginkgo’s business and financial condition.

The genetically engineered organisms and materials that Ginkgo develops may have significantly altered characteristics compared to those found in the wild, and the full effects of deployment or release of Ginkgo’s genetically engineered organisms and materials into uncontrolled environments may be unknown. In particular, such deployment or release, including an unauthorized release, could impact the environment or community generally or the health and safety of Ginkgo’s employees, Ginkgo’s customers’ employees, and the consumers of Ginkgo’s customers’ products.

In addition, if a high-profile biosecurity breach or unauthorized release of a biological agent occurs within Ginkgo’s industry, customers and potential customers may lose trust in the security of the laboratory environments in which Ginkgo produces GMOs and genetically modified plant or animal cells and genetically modified proteins and biomaterials (collectively, “Genetically Modified Materials”), even if Ginkgo is not directly affected. Any adverse effect resulting from such a release, by Ginkgo or others, could have a material adverse effect on the public acceptance of products from engineered cells and Ginkgo’s business and financial condition. Such a release could result in increased regulatory scrutiny of Ginkgo’s facilities, platform, and programs, and could require Ginkgo to implement additional costly measures to maintain regulatory permits, licenses, authorizations and approvals. To the extent such regulatory scrutiny or changes impact Ginkgo’s ability to execute on existing or new programs for Ginkgo’s customers, or make doing so more costly or difficult, Ginkgo’s business, financial condition, or results of operations may be adversely affected. In addition, Ginkgo could have exposure to liability for any resulting harm, as well as to regulatory actions, litigation, investigations, remediation obligations, damage to reputation and brand, supplemental disclosure obligations, loss of customer, consumer, and partner confidence in the safety of engineered cells materials and organisms, impairment to Ginkgo’s business, and corresponding fees, costs, expenses, loss of revenues, and other potential liabilities, as well as increased costs or loss of revenue or other harm to Ginkgo’s business.

Ginkgo could synthesize DNA sequences or engage in other activity that inadvertently contravenes biosecurity requirements, or regulatory authorities could promulgate more far-reaching biosecurity requirements that its standard business practices cannot accommodate, which could give rise to substantial legal liability, impede Ginkgo’s business, and damage its reputation.

The Federal Select Agent Program (“FSAP”) involves rules administered by the Centers for Disease Control and Prevention and the Animal and Plant Health Inspection Service that regulate possession, use, and transfer of biological select agents and toxins that have the potential to pose a severe threat to public, animal, or plant health or to animal or plant products. In accordance with the International Gene Synthesis Consortium’s (“IGSC”) Harmonized Screening Protocol for screening of synthetic DNA sequence orders, Ginkgo follows biosafety and biosecurity industry practices and avoid DNA synthesis activities that implicate FSAP rules by screening synthetic DNA sequence orders against the IGSC’s Regulated Pathogen Database; however, Ginkgo could err in its observance of compliance program requirements in a manner that leaves it in noncompliance with FSAP or other biosecurity rules. In addition, authorities could promulgate new biosecurity requirements that restrict operations. One or more resulting legal penalties, restraints on Ginkgo’s business or reputational damage could have material adverse effects on Ginkgo’s business, financial condition, or results of operations.

 

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Third parties may use Ginkgo’s engineered cells, materials, and organisms and accompanying production processes in ways that could damage its reputation.

After Ginkgo’s customers have received its engineered cells, materials, and organisms and accompanying production processes, Ginkgo does not have any control over their use and customers may use them in ways that are harmful to Ginkgo’s reputation. In addition, while Ginkgo has established a biosecurity program designed to comply with biosafety and biosecurity requirements and export control requirements in an effort to ensure that third parties do not obtain engineered cells or other biomaterials for malevolent purposes, Ginkgo cannot guarantee that these preventative measures will eliminate or reduce the risk of the domestic and global opportunities for the misuse or negligent use of engineered cells materials, and organisms and production processes. Accordingly, in the event of such misuse or negligent use, Ginkgo’s reputation, future revenue, and operating results may suffer.

International expansion of Ginkgo’s business exposes it to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

Ginkgo currently markets its services and delivers its programs, materials, and processes outside of the United States and may market future offerings outside of the United States. Ginkgo, and its suppliers, collaborators, and customers, currently conduct business outside of the United States. From time to time, Ginkgo’s services may include the hiring or secondment of employees outside the United States at third party facilities or require the hiring or secondment of foreign persons within Ginkgo’s facilities, including as a result of foreign acquisitions. Accordingly, Ginkgo is subject to a variety of risks inherent in doing business internationally, and exposure to these risks will increase as Ginkgo continues to expand its operations and customer base. These risks include:

 

   

political, social and economic instability;

 

   

fluctuations in currency exchange rates;

 

   

higher levels of credit risk, corruption, and payment fraud;

 

   

enhanced difficulties of integrating any foreign acquisitions;

 

   

increased expenses and diversion of Ginkgo’s management’s attention from advancing programs;

 

   

regulations that might add difficulties in repatriating cash earned outside the United States and otherwise prevent Ginkgo from freely moving cash;

 

   

import and export controls and restrictions and changes in trade regulations;

 

   

compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions;

 

   

multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, tariffs, trade regulations, economic sanctions and embargoes, employment laws, anti-corruption laws, regulatory requirements, reimbursement or payor regimes and other governmental approvals, permits and licenses;

 

   

failure by Ginkgo, its collaborators or its customers to obtain regulatory clearance, authorization or approval for the use of Ginkgo’s services in various countries;

 

   

additional potentially relevant third-party patent rights;

 

   

complexities and difficulties in obtaining intellectual property protection and enforcing Ginkgo’s intellectual property;

 

   

difficulties in staffing and managing foreign operations, including difficulties related to the increased operations, travel, infrastructure and legal compliance costs associated with international locations;

 

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logistics and regulations associated with shipping chemicals, biomaterials and product samples, including infrastructure conditions and transportation delays;

 

   

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises, on demand and payment for Ginkgo’s products and exposure to foreign currency exchange rate fluctuations;

 

   

natural disasters, political and economic instability, including wars (including the Russian invasion of Ukraine), terrorism and political unrest, the outbreak of disease, or public health epidemics, such as COVID-19, which could have an adverse impact on Ginkgo employees, contractors, customers, partners, travel and the global economy;

 

   

breakdowns in infrastructure, utilities and other services;

 

   

boycotts, curtailment of trade and other business restrictions; and

 

   

the other risks and uncertainties described in this proxy statement/prospectus.

Additionally, as part of Ginkgo’s growth strategy, it will continue to evaluate potential opportunities for international expansion. Operating in international markets requires significant resources and management attention and will subject Ginkgo to regulatory, economic and political risks in addition to those it faces in the United States. However, Ginkgo’s international expansion efforts may not be successful, which could limit the size of its market or the ability to provide services or programs internationally.

In addition, due to potential costs from any international expansion efforts and potentially higher supplier costs outside of the United States, Ginkgo’s international operations may operate with a lower margin profile. As a result, Ginkgo’s margins may fluctuate as it expands its operations and customer base internationally.

Any of these factors could significantly harm future international expansion and operations and, consequently, revenue and results of operations.

Risks Related to Ginkgo’s Customers

Ginkgo relies on its customers to develop, produce and manufacture products using the engineered cells and/or biomanufacturing processes that Ginkgo develops. If these initiatives by Ginkgo’s customers are not successful or do not achieve commercial success, or if Ginkgo’s customers discontinue their development, production and manufacturing efforts using Ginkgo’s engineered cells and/or biomanufacturing processes, Ginkgo’s future financial position may be adversely impacted.

Ginkgo operates as a platform company. As such, Ginkgo relies on its customers to commercialize products that may be enabled by its engineered cells and/or biomanufacturing processes. A portion of the value in customer collaborations is earned through downstream value sharing in the form of equity, royalty streams, or milestone payments. If customers are not successful in bringing these products to market, the downstream portion of value will be adversely impacted. Because Ginkgo does not directly control manufacturing, product or downstream process development or commercialization, Ginkgo has limited ability to impact the quality of its partners’ production processes and ultimate commercial success.

In addition, Ginkgo’s customers may simply choose not to develop or commercialize a product it has enabled in which Ginkgo is entitled to downstream value sharing. In Ginkgo’s current relationships, it would have limited or no recourse to find alternative methods to monetize these products without the original customer. Because this industry is still nascent and the regulatory environment is evolving, Ginkgo has limited historical information on the probability of commercial success for bioengineered products or biomanufacturing processes in the market and have limited ability to underwrite the likelihood that its customers will be able to create valuable products or processes in their market using the results of their programs with Ginkgo. If Ginkgo overestimates the probability of commercial success, the price of Ginkgo Class A Common Stock may be adversely impacted as a result of lower expectations for future cash flows from customer collaborations.

 

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Ginkgo’s revenue is concentrated in a limited number of customers, some of which are related parties, and Ginkgo’s revenue, results of operations, cash flows and reputation in the marketplace may suffer upon the loss of a significant customer.

Ginkgo has derived, and may continue to derive, a significant portion of revenue from a limited number of large customers. During the quarter ended June 30, 2022, three customers each represented more than 10% of total revenue and cumulatively represented 41% of total revenue. Due to the significant time required to acquire new customers, to plan and develop new programs for customers, and to satisfactorily execute on existing programs, the loss of any of these customers, or the loss of any other significant customer or a significant reduction in the amount of demand from a significant customer would adversely affect Ginkgo’s revenue, results of operations, cash flows and reputation in the marketplace. There is always a risk that existing customers will not elect to do business with Ginkgo in the future or will experience financial difficulties. If Ginkgo’s customers experience financial difficulties or business reversals which reduce or eliminate the need for Ginkgo’s services, they may be unable or unwilling to fulfill their contracts with Ginkgo. There is also the risk that customers will attempt to impose new or additional requirements that reduce the profitability of the services performed by Ginkgo. Ginkgo’s customer concentration also increases the concentration of accounts receivable and exposure to payment defaults by key customers, which could expose Ginkgo to substantial and potentially unrecoverable costs if Ginkgo does not receive payment from key customers. Additionally, the loss of any significant customer could pose reputational harm and make it more challenging to acquire new customers.

In addition, while customer collaborations are typically multi-year, Ginkgo generally does not require customers to generate a minimum amount of annual demand and without such contracts, customers are not obligated to use Ginkgo’s services beyond the amounts they choose to incur. Ginkgo’s customers may choose to use fewer of its services depending on program progress, their own technological capabilities, market demand for their products and/or their own internal budget cycles. As a result, Ginkgo cannot accurately predict customers’ decisions to reduce or cease utilizing its services. Even where Ginkgo enters into long-term contracts with customers, there is no guarantee that such agreements will be negotiated on terms that are commercially favorable to Ginkgo in the long-term. In addition, existing customers may choose to perform some or all of the services they expect from Ginkgo internally, with another third-party partner or by using capabilities from acquisitions of assets.

In certain cases, Ginkgo’s business partners may have discretion in determining when and whether to make announcements about the status of collaborations, including about developments and timelines for advancing programs, and the price of Ginkgo’s common stock may decline as a result of announcements of unexpected results or developments.

Generally, Ginkgo and its customers must mutually agree on determining when and whether to make announcements about the status of collaborations, including developments in the programs and timelines for commercialization of or improvements to products using engineered cells developed using Ginkgo’s platform. However, in some cases customers may report or otherwise may be obligated to disclose certain matters without Ginkgo’s consent. Ginkgo’s partners may also wish to report such information more or less frequently than Ginkgo intends to or may not wish to report such information at all. Ginkgo or its partners may announce a collaboration or partnership even if there is no guarantee that it will recognize program fees. The price of Ginkgo Class A Common Stock may decline as a result of a public announcement of unexpected results or developments in Ginkgo’s partnerships, or as a result of Ginkgo’s partners not consenting to an announcement or withholding information.

Risks Related to the COVID-19 Pandemic

The recent COVID-19 pandemic and the global attempt to contain it may harm Ginkgo’s business and results of operations.

The full impact of the continuing COVID-19 pandemic and related public health measures on Ginkgo’s business will depend largely on future developments, including the duration and severity of the pandemic, which

 

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remains highly uncertain. Extraordinary actions have been taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 throughout the world, including travel bans, quarantines, capacity limitations at facilities, “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Additionally, Ginkgo’s operations rely on the availability of laboratory scientists, engineers and facility, safety, quality and compliance personnel to work on-site. If a critical team member falls ill or needs to quarantine, or if a critical mass of Ginkgo’s personnel falls ill or needs to quarantine, Ginkgo may not be able to continue operations. The COVID-19 pandemic has also had an adverse effect on Ginkgo’s ability to attract, recruit, interview and hire at the pace Ginkgo would typically expect to support its rapidly expanding operations, as well as on its ability to build out facilities to accommodate expanding operations.

The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on operations, particularly as a result of preventive and precautionary measures that Ginkgo, other businesses, and governments are taking. For example, as part of these efforts and in accordance with applicable government directives, Ginkgo initially temporarily suspended some programs at its facilities in Boston, Massachusetts in late March 2020. Ginkgo has continued to operate within the rules and guidance applicable to its business during the pandemic, including by requiring physical distancing, quarantining personnel and reducing capacity limits in Ginkgo’s facilities, and operations at third-party facilities have been similarly impacted by governmental mandates and guidelines; however, a continuing implementation of these restrictions, or the implementation of additional restrictions, could further impact Ginkgo’s ability to operate effectively and conduct ongoing R&D, laboratory operations, sales and marketing activities or other activities or operations, or lead to further compliance costs.

Ginkgo has also incurred expenses associated with its efforts to accommodate personnel during the COVID-19 pandemic, including costs associated with the provision of COVID-19 testing to its personnel, safety accommodations, providing on-site amenities and enhanced on-site cleaning efforts, and Ginkgo will continue to incur such expenses associated with its operations.

The pandemic has also caused substantial disruption in global supply chains. These interruptions may require Ginkgo to suspend operations or delay programs. If Ginkgo continually delays programs with existing customers, it may be in breach of contracts with existing customers or customers may decide to cease doing business with Ginkgo or have decreased demand for its products. Ginkgo may also experience a slow-down in its pipeline of new programs or a termination of existing programs if customers or potential customers face disruptions during the pandemic. Difficulties and delays such as those Ginkgo has experienced and may experience in the future may prevent it from meeting operating and financial goals, both in general and within the targeted timelines, and may cause revenues and operating results to fluctuate from period to period.

Uncertainty regarding the ongoing demand and/or capacity (including capacity at third party clinical testing laboratories) of Ginkgo’s COVID-19 individual and pooled sample tests could materially adversely affect Ginkgo’s business.

Ginkgo’s biosecurity offering consists of COVID-19 testing programs are subject to inherent risks of commercial viability, such as demand for tests, price or market share erosion due to competition and the duration of the COVID-19 pandemic. Ginkgo is in a highly competitive market—many companies have launched or are seeking to launch COVID-19 testing products and many of these companies already have an existing commercial and technical infrastructure to market and commercialize such offerings. Ginkgo has limited experience marketing or commercializing diagnostic or pooled sample testing programs and may not be able to sufficiently support operations with its current base of personnel or recruit enough personnel to effectively commercialize COVID-19 testing programs, particularly during a pandemic, at which time the pipeline for experienced personnel will be in high demand. Moreover, as vaccines for COVID-19 and at-home or over-the-counter COVID-19 tests become more widely available, and as infection rates decrease, demand for COVID-19 testing may also decrease.

 

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Ginkgo’s COVID-19 testing business relies heavily on the adoption of pooled testing in schools, which may be hesitant to adopt COVID-19 testing without positive support from parents or teachers. Although Ginkgo makes test validation results and protocols available to parents and teachers, they may not trust the accuracy of the tests or may have concerns about how the tests are performed, how samples are used or tracked and whether appropriate privacy measures are being taken with respect to individually identifiable health information, including genetic information. The ability for schools to pay for COVID-19 testing relies heavily on the availability of federal, state or local funding for testing. If such funding is depleted, discontinued or otherwise becomes unavailable, or if there are restrictions on the use of such funding for Ginkgo’s pooled sample test offerings, Ginkgo’s COVID-19 testing business may not be commercially viable. Ginkgo’s COVID-19 testing business is subject to seasonality concerns as the demand for COVID-19 testing in schools is diminished during summer vacations, as well as other school breaks. In addition, as a result of the recent FDA emergency use authorization of a COVID-19 vaccine for children five through eleven years of age, the demand for COVID-19 testing in schools could diminish significantly or be eliminated.

Creating the commercial and technical infrastructure to test on a mass scale is expensive. Ginkgo may also be limited in its ability to scale up based on expense or unavailability of the required materials, equipment, personnel and infrastructure necessary to deliver diagnostic or pooled sample tests on a mass scale. Ginkgo may not be able to recover its investment expenses with sufficient revenue generated by its diagnostic and pooled sample testing efforts.

Ginkgo’s ability to commercialize its testing programs is also subject to regulatory or governmental controls, decisions or actions. If the U.S. Department of Health and Human Services (“HHS”) terminates its Declaration Justifying Emergency Use of Medical Countermeasures because the circumstances justifying emergency use no longer exist and, if the third-party COVID-19 tests that are used in Ginkgo’s testing services are not able to obtain premarket approval, clearance or other marketing authorization from the FDA, Ginkgo may be unable to market or distribute these COVID-19 tests, fulfill its contractual testing requirements or generate revenues from its test offerings. Ginkgo may also experience price erosion if federal or state governments implement price controls or if the price of supply inputs increase.

Finally, the sale of each test is dependent on the supply of the appropriate collection devices authorized for use with the COVID-19 tests Ginkgo utilizes in its testing programs. Disruptions in this supply chain will have a material adverse effect on its ability to sell tests.

Uncertainty regarding the sales and delivery of Ginkgo’s COVID-19 individual and pooled sample tests could materially adversely affect its business.

Although Ginkgo has partnerships with third party clinical testing laboratories to support a high volume of pooled sample testing for COVID-19 nationally, pooled testing has not yet been adopted by all states nor has Ginkgo established partnerships with clinical testing laboratories in all states. Ginkgo is continuing to develop processes to scale capacity of COVID-19 pooled sample collection and testing. However, Ginkgo can give no assurance that it will be able to successfully scale the pooled sample collection and test capacity or that it will be able to establish or maintain the collaborative third party relationships that support such testing capacity. In addition, even if Ginkgo is able to scale to high volume testing nationwide, there can be no assurance that the testing capacity will be used.

Ginkgo may be subject to tort liability if the COVID-19 tests it utilizes in its testing programs provide inaccurate results.

The Public Readiness and Emergency Preparedness Act (the “PREP Act”) provides immunity for manufacturers, distributors, program planners, qualified persons, and their officials, agents, and employees from certain claims under state or federal law for a “loss” arising out of the administration or use of a “covered countermeasure” in the United States. Distributors are certain persons or entities engaged in the distribution of

 

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drugs, biologics, or devices. Program planners include persons who supervise or administer a program with respect to the administration, distribution, provision, or use of a Covered Countermeasure (as defined in the PREP Act). Covered Countermeasures include security countermeasures and “qualified pandemic or epidemic products,” including products intended to diagnose or treat pandemic or epidemic disease, such as COVID-19 diagnostic tests, as well as treatments intended to address conditions caused by such products. Covered Countermeasures must also be approved, cleared, or authorized for emergency use, or otherwise authorized for investigational use, by the FDA in order to be considered Covered Countermeasures under the PREP Act.

For these immunities to apply, the Secretary of HHS must issue a declaration in cases of public health emergency or “credible risk” of a future public health emergency. On March 10, 2020, the Secretary of HHS issued a declaration under the PREP Act and has issued subsequent amendments thereto to provide liability immunity for activities related to certain countermeasures against the ongoing COVID-19 pandemic.

Ginkgo acts as the authorized distributor of certain third-party COVID-19 tests and collection kits that have received Emergency Use Authorization (“EUA”) and supervise testing programs for its COVID-19 testing customers. There can be no assurance that Ginkgo’s test distribution and program planning activities regarding these programs would be covered under the provisions of the PREP Act. Also, there can be no assurance that the U.S. Congress will not act in the future to reduce coverage under the PREP Act or to repeal it altogether.

Furthermore, some of the third-party tests used as part of Ginkgo’s pooled testing program are not covered by an EUA and, at this time, Ginkgo does not believe that such testing services, administration, or program planning related to Ginkgo’s pooled testing program will qualify for PREP Act immunity. If product liability lawsuits are brought against Ginkgo in connection with allegations of harm connected to Ginkgo’s COVID-19 testing services, Ginkgo may incur substantial liabilities and may be required to limit its testing services. The PREP Act is a complex law with limited judicial precedent, and thus even for the third-party COVID-19 tests and collection kits used in Ginkgo’s testing services that are subject to EUAs, Ginkgo may have to expend significant time and legal resources to obtain dismissal of a lawsuit on the basis of PREP Act immunity.

If Ginkgo cannot successfully defend itself against claims that its COVID-19 testing services caused injuries and if Ginkgo is not entitled to immunity under the PREP Act, or the U.S. Congress limits or eliminates coverage under the PREP Act, or if the liability protections under the PREP Act are not adequate to cover all claims, Ginkgo may incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in decreased demand for Ginkgo’s services, injury to its reputation, costs to defend litigation, loss of revenue, and substantial money awards to customers.

Ginkgo is dependent on relationships with its telehealth partner to provide healthcare services, and its business would be adversely affected if those relationships were disrupted.

Ginkgo’s contractual relationships with its telehealth partner who provides physician authorization for COVID-19 diagnostic and screening testing may implicate certain state laws in the United States that generally prohibit non-physician entities from practicing medicine, exercising control over physicians or engaging in certain practices such as fee-splitting with physicians. There can be no assurance that these laws will be interpreted in a manner consistent with Ginkgo’s practices or that other laws or regulations will not be enacted in the future that could have a material and adverse effect on its business, financial condition and results of operations. Regulatory authorities, state medical boards of medicine, state attorneys general and other parties, including Ginkgo’s telehealth partner, may assert that it is engaged in the prohibited corporate practice of medicine, and/or that its arrangements with its telehealth partner constitutes unlawful fee-splitting. If a state’s prohibition on the corporate practice of medicine or fee-splitting law is interpreted in a manner that is inconsistent with Ginkgo’s practices, it would be required to restructure or terminate the relationship with Ginkgo’s telehealth partner to bring its activities into compliance with such laws. A determination of non-compliance, or the termination of or failure to successfully restructure these relationships could result in disciplinary action, penalties, damages, fines, and/or a loss of revenue, any of which could have a material and

 

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adverse effect on Ginkgo’s business, financial condition and results of operations. State corporate practice of medicine doctrines and fee-splitting prohibitions also often impose penalties on healthcare professionals for aiding the corporate practice of medicine, which could discourage Ginkgo’s telehealth partner from providing services.

Risks Related to the Synthetic Biology Industry

Rapidly changing technology and emerging competition in the synthetic biology industry could make the platform, programs, and products Ginkgo and its customers are developing obsolete or non-competitive unless Ginkgo continues to develop its platform and pursue new market opportunities.

The synthetic biology industry is still emerging and is characterized by rapid and significant technological changes, frequent new product introductions and enhancements, and evolving industry demands and standards. Ginkgo’s future success will depend on its ability to sign and initiate new programs that address the evolving needs of customers on a timely and cost-effective basis, to advance existing programs and to pursue new market opportunities that develop as a result of technological and scientific advances. Additionally, customers may face significant competition or other risks which may adversely impact Ginkgo’s business and results of operations.

There are a number of companies in the broader synthetic biology industry, and Ginkgo’s future success will depend on its ability to maintain a competitive position with respect to technological advances. Technological development by others may result in Ginkgo’s platform becoming obsolete. Ginkgo’s ability to compete successfully will depend on its ability to develop proprietary technologies that enable its customers to develop products using its platform in a manner that is either less expensive, faster, superior or otherwise differentiated from what a competitor’s technologies and products might enable. If Ginkgo is unable to continue to successfully advance its platform or the services it provides at scale, or if its customers are unable to commercialize the products or processes made or improved upon by using the platform, Ginkgo’s business and results of operations will be adversely impacted.

Due to the significant lead time involved in launching a new program or developing a new product or process using Ginkgo’s platform, customers are required to make a number of assumptions and estimates regarding the commercial feasibility of a new program, including assumptions and estimates regarding the size of an emerging product category and demand for those end-products and processes which will use Ginkgo technology, the ability to scale-up manufacturing processes to produce a product on a commercial scale, the ability to penetrate that emerging product category, customer adoption of a downstream product, the existence or non-existence of products being simultaneously developed by competitors, potential market penetration and obsolescence, planned or unplanned. As a result, it is possible that Ginkgo may commence a new program with a customer who wishes to develop a product or process that has been displaced by the time of launch, addresses a market that no longer exists or is smaller than previously thought, that end-consumers do not like or otherwise is not competitive at the time of launch, in each case, after the incurrence of significant opportunity costs on Ginkgo’s part to develop such product. The ultimate success of the products developed by Ginkgo’s customers using its services may be dependent on the success of other markets in which Ginkgo or its customers do not operate in or have knowledge or expertise or which, in each case, may not reach the size anticipated by Ginkgo or its customers or may be replaced by another emerging product category or eliminated entirely.

The market, including customers and potential investors, may be skeptical of Ginkgo’s ability to deliver on programs because they are based on a relatively novel and complex technology.

The market, including customers and potential investors, may be skeptical of the viability and benefits of bioengineered products as well as Ginkgo’s enabling abilities, including its platform and programs, because they are based on a relatively novel approach and the adoption of complex technology. There can be no assurance that Ginkgo’s platform and programs will be understood, approved, or accepted by customers, regulators and potential investors or that Ginkgo will be able to sell its services profitably at competitive prices and with features sufficient to establish demand.

 

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In addition, in order for novel products from Ginkgo programs to be successfully commercialized, support from the entire relevant supply chain is needed. Relationships with all parts of the supply chain are important in order to gain visibility into market trends and feature and specification requirements and in order to ensure customers are able to successfully manufacture their products, obtain regulatory approval and gain access to key distribution channels. If Ginkgo is unable to convince these potential customers, their suppliers, or the consumers who purchase products containing or made or developed using engineered cells and/or biomanufacturing processes, of the utility and value of such products or that such products are superior to the products they currently use, Ginkgo will not be successful in entering these markets and its business and results of operations will be adversely affected. If potential investors are skeptical of the success of Ginkgo’s platform or cell programs, its ability to raise capital and the value of common stock may be adversely affected.

Ethical, legal and social concerns about GMOs and Genetically Modified Materials and their resulting products could limit or prevent the use of products or processes using Ginkgo technologies, limit public acceptance of such products or processes and limit Ginkgo’s revenues.

Ginkgo technologies and the technologies of Ginkgo’s customers involve the use of genetically modified cells, organisms and biomaterials, including, without limitation, GMOs, genetically modified microorganisms (“GMMs”), Genetically Modified Materials and their respective products. The use, production and marketing of Genetically Modified Materials, are subject to laws and regulations in many countries, some of which are new and some of which are still evolving. In the United States, the FDA, the Environmental Protection Agency (“EPA”) and the U.S. Department of Agriculture (“USDA”) are the primary agencies that regulate the use of GMOs, GMMs and potential products derived from GMOs or GMMs. If regulatory approval of the Genetically Modified Materials or resulting products is not secured, Ginkgo’s business operations, financial condition and ability to grow as a business could be adversely affected. Ginkgo expects to encounter regulations regarding Genetically Modified Materials in most, if not all, of the countries in which customers may seek to establish production capabilities or sell their products and the scope and nature of these regulations will likely be different from country to country. Governmental authorities could, for safety, social or other purposes, impose limits on, or implement regulation of, the use, production or marketing of Genetically Modified Materials. If customers cannot meet the applicable requirements in other countries in which they intend to produce or sell their products, or if it takes longer than anticipated to obtain such approvals, Ginkgo’s business could be adversely affected.

In addition, public perception regarding the safety and environmental hazards of, and ethical concerns over, Genetically Modified Materials or the processes used to create them, including gene editing or gene regulating technologies, could influence public acceptance of Ginkgo’s and its customers’ technologies, products, and processes. For instance, certain advocacy groups engage in efforts that include regulatory legal challenges and labeling campaigns for genetically modified products, as well as application of pressure to consumer retail outlets seeking a commitment not to carry genetically modified foods. These groups in the past have pressured retail food outlets and grocery store chains to publicly state that they will not carry genetically modified foods and have pressured food brands to publicly state that they will not use ingredients produced by genetically modified microbes. In addition, certain labeling-related initiatives have heightened consumer awareness of GMOs, which may make consumers less likely to purchase products containing GMO ingredients, which could have a negative impact on the commercial success of Ginkgo’s customers’ products and programs. These concerns could result in increased expenses, regulatory scrutiny, delays or other impediments to Ginkgo’s programs. The subject of Genetically Modified Materials has received negative publicity, which has aroused public debate. This adverse publicity has led to, and could continue to lead to, greater regulation and trade restrictions on imports of Genetically Modified Materials or their resulting products. In addition, with the acquisitions of Dutch DNA Biotech B.V. and FGen AG (“FGen”), Ginkgo is expanding into the European Union market, which has increased government regulation and scrutiny over genetically modified products. There is a risk that products produced using Ginkgo technologies could cause adverse health effects or other adverse events, which could also lead to negative publicity, regulatory action or private litigation. If Ginkgo is unable to overcome the ethical, legal and social concerns relating to genetic engineering, its programs could face increased expenses, regulatory

 

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scrutiny, delays or other impediments to deliver programs or the commercialization of resulting products and processes.

Finally, the COVID-19 pandemic may increase biosecurity concerns by public and/or governmental stakeholders regarding genetic engineering technologies and risks around engineered viruses, microbes and organisms. Such concerns, restrictions, or governmental restrictions could limit the use of Genetically Modified Materials in customers’ products, which could have a material adverse effect on Ginkgo’s business, financial condition and results of operations.

Risks Related to Intellectual Property

If Ginkgo is unable to obtain, maintain and defend patents protecting its intellectual property, its competitive position will be harmed.

Ginkgo’s success depends in part on its ability to obtain and maintain intellectual property protection for its proprietary technologies. Ginkgo protects its proprietary technologies through patents and trade secrets, both of which entail risk. If Ginkgo is unable to obtain, maintain or protect intellectual property rights related to its technology, or if its intellectual property rights are inadequate, its competitive position, business, financial conditions, results of operations and prospects may be harmed.

Because of the volume and nature of Ginkgo’s inventions, patent protection may not be practicable, available, or appropriate for some aspects of its proprietary technologies. While Ginkgo owns patents and pending patent applications in the United States and in foreign jurisdictions, these applications do not ensure the protection of its intellectual property. There may be prior art of which Ginkgo is not aware. Additionally, obtaining, maintaining, defending and enforcing patents is costly, time consuming and complex, and Ginkgo may not be able to file and prosecute all necessary or desirable patent applications, or maintain and enforce any patents that may issue from such patent applications at a reasonable cost or in a timely manner. It is also possible that Ginkgo will fail to identify patentable aspects of its technologies before it is too late to obtain patent protection. Although Ginkgo enters into confidentiality agreements with parties who have access to confidential or patentable aspects of Ginkgo’s R&D output, such as its employees, collaborators, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing its ability to seek patent protection.

Further, pending applications may not be issued or may be issued with claims significantly narrower than Ginkgo currently seeks. Patents for which claims have been allowed may be successfully challenged and invalidated. Unless and until Ginkgo’s pending applications issue, their protective scope is impossible to determine and, even after issuance, their protective scope may be limited.

Recent changes in patent law have made patents covering life science inventions more difficult to obtain and enforce. Further legislative changes or changes in the interpretation of existing patent law could increase the uncertainty and cost surrounding the prosecution of owned patent applications and the maintenance, enforcement or defense of Ginkgo’s owned patents. The Leahy-Smith America Invents Act (“the Leahy-Smith Act”) included changes that affect the way patent applications are prosecuted; redefine prior art; enable third-party submission of prior art to the United States Patent and Trademark Office (“USPTO”) during patent prosecution; and provide cost-effective avenues for competitors and other third parties to challenge the validity of patents at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Thus, the Leahy-Smith Act and its continued implementation could increase the uncertainties and costs surrounding the prosecution of Ginkgo’s patent applications and the enforcement or defense of its issued patents, all of which could have a material adverse effect on its business, financial condition, results of operations, and prospects.

Other changes in the law may further detract from the value of life science patents and facilitate challenges to Ginkgo’s patents. In some cases, Ginkgo uses genetic sequence information from naturally occurring

 

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organisms, which may not be patentable. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection for naturally occurring sequences and for inventions based on the observation and exploitation of natural phenomena. These decisions have weakened the rights of patent owners in certain situations. The U.S. Court of Appeals for the Federal Circuit has also issued a series of rulings that create obstacles to the patenting of groups of genetic sequences that share functional characteristics, making it more difficult to obtain claims to certain genetic constructs, particularly antibodies. These changes in the law have created uncertainty with respect to the validity and enforceability of patents covering natural and engineered sequences. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a further material adverse effect on Ginkgo’s patent rights and its ability to protect, defend and enforce its patent rights in the future.

Further, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and Ginkgo’s patents may be challenged in the courts or patent offices in the United States and abroad. An adverse determination in any such challenge could result in loss of exclusivity, or patent claims being narrowed, invalidated or held unenforceable, in whole or in part. Any of these results could limit Ginkgo’s ability to stop others from using or commercializing similar or identical technology to compete directly with Ginkgo. In addition, if the breadth or strength of protection provided by Ginkgo’s patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with Ginkgo. Such proceedings also may result in substantial cost and require significant time from Ginkgo’s scientists and management, even if the eventual outcome is favorable to Ginkgo.

The laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States or may apply different rules concerning the assignment of intellectual property rights. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. Ginkgo may encounter similar difficulties, particularly as it expands to work with foreign employees and contractors and expand its collaboration activities into foreign markets. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents by foreign holders and, in some cases, do not favor the enforcement of patents at all, particularly patents in the life sciences. This could make it difficult for Ginkgo to stop the infringement of its patents. Proceedings to enforce Ginkgo’s patent rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business and could be unsuccessful.

Reductions in the scope or enforceability of Ginkgo’s patent protection may adversely affect its customers’ ability to commercialize their products and may thus reduce downstream value from royalties, equity, or commercial milestone payments.

If Ginkgo is unable to protect the confidentiality of its trade secrets, its business and competitive position will be harmed.

Because patent protection may not be available or appropriate for significant aspects of the technology Ginkgo is developing, Ginkgo’s success may depend in large part on its proprietary information, including genetic and other chemical and biological data, processes, know-how, and other trade secrets developed over years of R&D, some of which are embodied in proprietary software. Ginkgo relies heavily on trade secret protections, especially in cases where Ginkgo believes patents or other forms of registered intellectual property protection may not be appropriate or obtainable. However, trade secrets are difficult to protect. The secrecy of the Ginkgo’s trade secrets must be maintained for them to retain their status and protection as trade secrets. While Ginkgo strives to protect the secrecy of its trade secrets and other proprietary information, including by requiring employees, customers, consultants, and contractors to enter into confidentiality agreements and instituting multilayered protections covering digital environment and biomaterials, Ginkgo may not be able to adequately protect its trade secrets or other proprietary information. Ginkgo cannot guarantee that it has entered into such agreements with every party that may have or has had access to trade secrets, biomaterials or proprietary technology and processes. Further, despite these efforts, any of these parties may breach the

 

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agreements and disclose proprietary information, including trade secrets, and Ginkgo may not be able to obtain adequate remedies for such breaches.

Ginkgo seeks to preserve the integrity and confidentiality of its information by maintaining physical security of its premises and physical and electronic security of information technology systems, but it is possible that these security measures could be breached. Ginkgo also relies on systems provided by third parties, which may suffer security breaches or incidents. Such security breaches may be inadvertent or may come about due to intentional misconduct or other malfeasance or by human error or technical malfunctions, including those caused by hackers, employees, contractors, or vendors. It may be difficult or impossible to recover trade secrets or other confidential information once it is hacked, and hackers may operate from jurisdictions that will not cooperate with such efforts. Enforcing any claim that a third party unlawfully obtained and is using any of Ginkgo’s trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts in some jurisdictions are less willing or unwilling to protect trade secrets even when a hacker or thief can be identified.

Ginkgo’s competitors may lawfully obtain or independently develop knowledge that is equivalent to one or more of Ginkgo’s trade secrets. Were they to do so, Ginkgo would be unable to prevent them from using that independently developed knowledge. Such a competitor could claim that Ginkgo had learned the trade secret from them and bring an action against Ginkgo on that basis. If any of Ginkgo’s trade secrets were to be disclosed to or independently developed by a competitor or other third party, Ginkgo’s competitive position could be materially and adversely harmed. Moreover, a competitor could file for patent protection covering intellectual property that Ginkgo has chosen to protect as a trade secret. In such a case, Ginkgo might be restricted or excluded from using that intellectual property even if Ginkgo had developed it before the competitor did.

Ginkgo’s facilities hold large collections of microbial strains, cell lines and other biomaterials. Failure to implement adequate controls and protections, failure to implement adequate disposal procedures, unauthorized visitors in the labs, or customers’ failure to adequately protect biological materials can put Ginkgo and its customers at risk of losing valuable assets through negligence or theft and enabling the use of those lost materials by competitors. While Ginkgo believes that it takes reasonable measures to protect the security of biomaterials owned by it or its customers, it is possible that Ginkgo’s security controls and practices may not prevent unauthorized or other improper access to such genetic material. Any unauthorized access, acquisition, use, destruction, or release of the GMOs Ginkgo engineers could result in having exposure to significant liability under Ginkgo’s contracts, as well as to regulatory actions, litigation, investigations, remediation obligations, damage to Ginkgo’s reputation and brand, supplemental disclosure obligations, loss of customer, consumer, or partner confidence in the security of its platform, impairment to Ginkgo’s business, and corresponding fees, costs, expenses, loss of revenues, and other potential liabilities.

Ginkgo’s customers sometimes provide organisms, genetic material and/or data to Ginkgo in connection with the collaborations. In the event that Ginkgo fails to protect customer materials or data or inadvertently use such materials or data for unauthorized purposes, Ginkgo could be liable to its customers under trade secret laws or contractual provisions.

There could be unintended consequences to the environment generally or the health and safety of Ginkgo employees or the public as a result of an unauthorized release of Genetically Modified Materials into uncontrolled environments. In addition, if a biosecurity breach or unauthorized release of genetic material were to occur within the industry, Ginkgo customers and potential customers might lose trust in the security of the laboratory environments in which Ginkgo produces GMOs, even if Ginkgo is not directly affected. Any adverse effect resulting from such a release, by Ginkgo or others, could have a material adverse effect on the public acceptance of its products and business and its financial condition. Such a release could result in enhanced regulatory activity, and Ginkgo could have exposure to liability for any resulting harm.

 

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Ginkgo may be subject to claims challenging the inventorship or ownership of its patents, biomaterials and other intellectual property.

Certain of Ginkgo’s employees, consultants and contractors were previously employed at universities or other software or biotechnology companies, including at competitors or potential competitors. Additionally, some of Ginkgo’s consultants or contractors may have ongoing relationships with universities. Although Ginkgo tries to ensure that its employees, consultants and contractors do not use the intellectual property of others in their work for Ginkgo, Ginkgo may be subject to claims that these individuals or other contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of another. Litigation may result from these claims.

While it is Ginkgo’s policy to require that its employees, consultants and contractors who may be involved in the development of intellectual property execute agreements assigning such intellectual property to Ginkgo, Ginkgo may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that Ginkgo regards as its own. Ginkgo’s intellectual property assignment agreements with them may not be self-executing or may be breached, and Ginkgo may be forced to bring claims against third parties, or defend claims they may bring against Ginkgo, to determine the ownership of what Ginkgo regards as its intellectual property. Such claims could have a material adverse effect on Ginkgo’s business, financial condition, results of operations and prospects.

If Ginkgo is unsuccessful in litigating any such claims, in addition to paying monetary damages, Ginkgo may lose valuable intellectual property rights or personnel, which could have a material adverse effect on Ginkgo’s competitive business position and prospects. Such intellectual property rights could be awarded to a third party, and Ginkgo could be required to obtain a license from such third party to use or commercialize its technology or products, which license might not be available on commercially reasonable terms, or at all. Even if Ginkgo is successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to Ginkgo’s management and employees.

The life science academic and research community has abided by norms of free exchange of biomaterials, but recently, norms have begun to change so that parties may assert ownership and control over biomaterials that they permitted to be freely disseminated in the past. Thus, despite Ginkgo’s best efforts to confirm Ginkgo’s right to use biomaterials in Ginkgo’s possession, Ginkgo may use organisms that it believes to be free of encumbrance that are, in fact, subject to claims of title by others. In such a situation, litigation may be required to clear title, if it can be cleared at all. Similarly, Ginkgo may be subject to claims that Ginkgo has used biomaterials obtained from licensors or repositories for unauthorized purposes, or purposes not consistent with the licensing terms of the providing organization.

Ginkgo may become involved in lawsuits or other enforcement proceedings to protect or enforce its patents or other intellectual property, which could be expensive, time consuming and potentially unsuccessful.

Competitors and other third parties may infringe or otherwise violate Ginkgo’s issued patents or other intellectual property. In addition, Ginkgo’s patents may become involved in inventorship, ownership, or priority disputes. Ginkgo may also become subject to claims by collaboration partners that intellectual property or biomaterials that Ginkgo believes to be owned by it are actually owned by them. Any litigation concerning any of these issues would be expensive, time consuming and uncertain. There can be no assurances that Ginkgo would prevail in any suit brought by Ginkgo or against Ginkgo by third parties, or successfully settle or otherwise resolve those claims. Significant litigation would have substantial costs, even if the eventual outcome were favorable to Ginkgo, and would divert management’s attention from Ginkgo’s business objectives.

Under certain circumstances, Ginkgo may share or lose rights to intellectual property developed under U.S. federally funded research grants and contracts.

Some of Ginkgo’s inventions, data, or other intellectual property have been or may be developed during the course of research funded by the U.S. government. The U.S. government may have the right to take title to

 

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government-funded inventions if Ginkgo fails to disclose the inventions to the government in a timely manner or fail to file a patent for the intellectual property within specified time limits. Further, in consequence of Ginkgo receiving government funding, the U.S. government may have certain rights to intellectual property that Ginkgo uses in its platform or programs pursuant to the Bayh-Dole Act of 1980, as amended (the “Bayh-Dole Act”). Under the Bayh-Dole Act, U.S. government rights in certain “subject inventions” developed under a government-funded program may include a non-exclusive, irrevocable worldwide license to use inventions for any governmental purpose. In some circumstances, the U.S. government may acquire unlimited rights in data generated. In addition, the U.S. government has the right to require Ginkgo, or an assignee or exclusive licensee to U.S. government-funded inventions, to grant licenses to any of these inventions to the government or a third party if the government determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; (iii) government action is necessary to meet requirements for public use under federal regulations; or (iv) the right to use or sell such inventions is exclusively licensed to an entity within the United States and substantially manufactured outside the United States without the U.S. government’s prior approval. Additionally, Ginkgo may be restricted from granting exclusive licenses for the right to use or sell such inventions unless the licensee agrees to comply with relevant Bayh-Dole Act restrictions (e.g., manufacturing substantially all of the invention in the United States) and reporting requirements. In addition, the U.S. government may acquire title in any country in which a patent application is not filed. Certain technology and inventions are also subject to transfer restrictions during the term of these agreements with the U.S. government and for a period thereafter. These restrictions may limit sales of products or components, transfers to foreign subsidiaries for the purpose of the relevant agreements, and transfers to certain foreign third parties. If any of Ginkgo’s intellectual property becomes subject to any of the rights or remedies available to the U.S. government or third parties pursuant to the Bayh-Dole Act, this could impair the value of Ginkgo’s intellectual property and could adversely affect its business.

The use of digital genetic sequence information may be subject to the Nagoya Protocol, which could increase Ginkgo’s costs and adversely affect its business.

The Nagoya Protocol is a supplemental agreement to the Convention on Biological Diversity (“CBD”). The Nagoya Protocol is designed to provide for equitable sharing of benefits arising from the utilization of genetic resources and traditional knowledge. Under the Nagoya Protocol, countries possessing genetic resources (“source countries”) are tasked with setting up procedures and institutional infrastructure for researchers to obtain prior informed consent, both from the source country and from any relevant indigenous or traditional communities, for biological research. Many have been slow to adopt workable institutions permitting the rational negotiation of benefit-sharing agreements. Many source countries are now asserting that the use of digital genetic sequence information is subject to the constraints of the Nagoya Protocol or similar national- or local-level benefit-sharing requirements. It is unclear whether this position will ultimately be adopted or what the implications of such adoption might be. It is unclear what a source country might assert if Ginkgo used genetic sequences (i) extracted by a third party from a natural resource that was removed from its source country before that source country ratified the CBD or signed the Nagoya Protocol (ii) extracted by a third party and uploaded to public sequence databases after the source country ratified the CBD; (iii) in a heterologous host organism; or (iv) as a base for further engineering, so that the sequence Ginkgo uses no longer conforms to the natural sequence on which it was based.

Ginkgo makes extensive use of public and proprietary sequence databases to support its work. While Ginkgo undertakes efforts to identify and comply with laws and international protocols relating to the use of genetic resources, the uncertainty surrounding the use of digital sequence information and the lack of workable institutions in many source countries for the efficient negotiation of benefit-sharing agreements may limit use or cause uncertainty in use of certain sequences that Ginkgo obtains from public access databases or natural sources. New financial obligations may arise regarding Ginkgo’s use of sequence information. Customers that must certify their compliance with Nagoya Protocol obligations may be reluctant to do business with Ginkgo unless Ginkgo engages in expensive and time-consuming benefit-sharing negotiations with source countries of

 

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publicly available genetic sequences. These changes could increase R&D costs and adversely affect Ginkgo’s business, financial condition, and results.

Third party patents may limit Ginkgo’s freedom to operate in certain areas, which may adversely affect its business.

There may be patents that affect Ginkgo’s freedom to operate in certain areas, and Ginkgo may as a result choose to design around or license such patents from third parties. If Ginkgo must spend significant time and money designing around or licensing patents held by others, Ginkgo’s business and financial prospects may be harmed. Ginkgo may be restricted from carrying out certain operations in its Foundry or may be limited in its ability to design new products for customers. Ginkgo may become subject to claims by third parties alleging that Ginkgo is infringing, misappropriating, or otherwise violating their intellectual property rights.

If Ginkgo is sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay Ginkgo from using its platform and technologies.

Any litigation arising from any dispute relating to the intellectual property of third parties would be expensive, time-consuming, and uncertain. There can be no assurance that Ginkgo would prevail in any such dispute. Parties making claims against Ginkgo might be able to obtain injunctive or other relief, which could block Ginkgo or its customers’ ability to develop, commercialize and sell products or use Ginkgo’s technologies, and could result in the award of substantial damages against Ginkgo, including treble damages, attorney’s fees, costs and expenses if Ginkgo were found to have willfully infringed. In the event of a successful claim against Ginkgo, Ginkgo or its customers might be required to pay damages and ongoing royalties, and obtain licenses from third parties, or be prohibited from selling certain products or using certain technologies. Ginkgo may not be able to obtain these licenses on acceptable or commercially reasonable terms, if at all. In addition, Ginkgo or its customers could encounter delays in product or service introductions while Ginkgo attempts to develop alternative designs or redesign existing products or technologies to avoid or resolve these claims. Ginkgo’s loss in any lawsuit or failure to obtain a license could prevent it from using its platform and technologies. Such a loss or failure could materially affect Ginkgo’s business and reputation. Any litigation pertaining to these issues would have substantial costs, even if the eventual outcome were favorable to Ginkgo, and would divert management’s attention from its business objectives.

If Ginkgo’s trademarks and trade names are not adequately protected, then Ginkgo may not be able to build name recognition in its markets of interest and its business may be adversely affected.

Ginkgo’s registered or unregistered trademarks or trade names may be challenged, infringed, diluted, tarnished, circumvented or declared generic or determined to be infringing on other marks. Ginkgo may not be able to protect its rights to these trademarks and trade names, which Ginkgo needs to build name recognition among potential collaborators or customers in markets of interest. At times, competitors may adopt trade names or trademarks similar to Ginkgo’s, thereby impeding Ginkgo’s ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement, dilution or tarnishment claims brought by owners of other trademarks or trademarks that incorporate variations of Ginkgo’s registered or unregistered trademarks or trade names. Over the long term, if Ginkgo is unable to establish name recognition based on its trademarks and trade names, then it may not be able to compete effectively and its business may be adversely affected. Ginkgo’s efforts to enforce or protect its proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect its business, financial condition, results of operations and prospects.

 

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Any claims or lawsuits relating to infringement of intellectual property rights brought by or against Ginkgo will be costly and time consuming and may adversely affect its business, financial condition and results of operations.

Any of the risks identified above could result in significant litigation. In addition to the specific litigation-related risks identified above, litigation of any kind carries certain inherent risks. Because of the substantial amount of discovery required in connection with litigation in U.S. courts, there is a risk that some of Ginkgo’s confidential information could be compromised in the discovery process. There could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on Ginkgo’s share price.

Further, Ginkgo’s agreements with some of its customers, suppliers or other entities require it to defend or indemnify these parties if they become involved in infringement claims that target its products, services or technologies, or in certain other situations. If Ginkgo must defend or indemnify third parties, it could incur significant costs and expenses that could adversely affect its business, operating results or financial condition.

Intellectual property rights do not necessarily address all potential threats to Ginkgo’s business.

The degree of future protection afforded by Ginkgo’s intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect its business or permit Ginkgo to maintain its competitive advantage. The following examples are illustrative:

 

   

Ginkgo may choose not to file a patent in order to maintain certain intellectual property as trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property;

 

   

others may independently develop similar or alternative technologies or duplicate any of Ginkgo’s technologies without infringing Ginkgo’s owned or licensed intellectual property rights;

 

   

the patents of others may harm Ginkgo’s business;

 

   

Ginkgo might not have been the first to make the inventions covered by the issued patents or pending patent applications that Ginkgo owns;

 

   

Ginkgo might not have been the first to file patent applications covering certain of Ginkgo’s inventions; and

 

   

issued patents that Ginkgo holds rights to may fail to provide it with any competitive advantage, or may be held invalid or unenforceable, including as a result of legal challenges by competitors.

Should any of these events occur, they could harm Ginkgo’s business, financial condition, results of operations and prospects.

Intellectual property disputes of third parties and customers could have a material adverse effect on Ginkgo’s business, financial condition, and results.

Ginkgo relies, and expects to continue to rely on, certain capital equipment, machinery, consumables, reagents, software, services and intellectual property that it purchases or licenses from third parties for use in its operations, platform, products, services and offerings. Ginkgo cannot be certain that its vendors, suppliers, and licensors are not infringing upon the intellectual property rights of others or that they have sufficient rights to the third-party technology used in its business in all jurisdictions in which it may operate. Disputes with any of these third parties over uses or terms could result in the payment of additional royalties or penalties by Ginkgo, cancellation or non-renewal of the underlying license, termination of supplies or rights to use, or litigation. In the event that Ginkgo cannot resolve issues of this kind, Ginkgo may be required to discontinue or limit its use of the operations, platform, products, services or offerings that include or incorporate the licensed intellectual property. Any such discontinuation or limitation could have a material and adverse impact on its business, financial condition and results of operation.

 

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Ginkgo’s customers may become involved in intellectual property disputes with third parties that are related or unrelated to any products or services Ginkgo has supplied or rendered to them. Such disputes could result in a customer being unable to market its products, thus depriving Ginkgo of license, milestone, or other revenues. Such deprivation could have a material adverse impact on Ginkgo’s financial condition and results.

Ginkgo’s use of “open-source” software could negatively affect its ability to market or provide its services and could subject Ginkgo to possible litigation.

Ginkgo has used “open-source” software in connection with the development and deployment of its software platform, and expects to continue to use open-source software in the future. Open-source software is licensed by its authors or other third parties under open-source licenses, which in some instances may subject Ginkgo to certain unfavorable conditions, including requirements that Ginkgo offer its products that incorporate the open-source software for no cost, that Ginkgo make publicly available all or part of the source code for any modifications or derivative works Ginkgo creates based upon, incorporating or using the open-source software, or that Ginkgo license such modifications or derivative works under the terms of the particular open-source license.

Companies that incorporate open-source software into their products have, from time to time, faced claims challenging the use of open-source software and compliance with open-source license terms. Ginkgo could be subject to similar suits by parties claiming ownership of what Ginkgo believes to be open-source software or claiming noncompliance with open-source licensing terms. While Ginkgo monitors its use of open-source software and tries to ensure that none is used in a manner that would require Ginkgo to disclose its proprietary source code or that would otherwise breach the terms of an open-source agreement, Ginkgo cannot guarantee that it will be successful, that all open-source software is reviewed prior to use in its platform, that its developers have not incorporated open- source software into its products that Ginkgo is unaware of or that they will not do so in the future.

Furthermore, there are an increasing number of open-source software license types, almost none of which have been interpreted by U.S. or foreign courts, resulting in a dearth of guidance regarding the proper legal interpretation of such licenses. As a result, there is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on Ginkgo’s ability to market or provide its products and services. If Ginkgo is held to have breached or failed to fully comply with all the terms and conditions of an open-source software license, Ginkgo could face infringement claims or other liability, or be required to seek costly licenses from third parties to continue providing its offerings on terms that are not economically feasible, if at all, to re-engineer all or a portion of Ginkgo’s platform, to discontinue or delay the provision of Ginkgo’s offerings if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, its proprietary code. Further, in addition to risks related to license requirements, use of certain open-source software carries greater technical and legal risks than does the use of third-party commercial software. For example, open-source software is generally provided without any support or warranties or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. To the extent that Ginkgo’s platform depends upon the successful operation of open-source software, any undetected errors or defects in open-source software that Ginkgo uses could prevent the deployment or impair the functionality of its systems and injure its reputation. In addition, the public availability of such software may make it easier for others to compromise Ginkgo’s platform. Any of the foregoing risks could materially and adversely affect Ginkgo’s business, financial condition and results of operations.

 

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Risks Related to Personnel, IT and Physical Infrastructure

Loss of key personnel, including Ginkgo’s founders and senior executives, and/or failure to attract, train and retain additional key personnel could delay Ginkgo’s cell engineering programs, harm its platform development efforts, limit its biosecurity offerings, and harm its ability to meet its business objectives, particularly given the substantial investment required to train certain of its employees.

Ginkgo’s business involves complex, global operations across a variety of markets and requires a management team and employee workforce that is knowledgeable in the many areas in which Ginkgo operates. Ginkgo’s future success depends upon its ability to attract, train, retain and motivate highly qualified management, scientific, engineering, information technology, operations, business development and marketing personnel, among others. In addition, the market for qualified personnel is very competitive because of (a) the limited number of people available who have the necessary technical skills and understanding of Ginkgo’s technology and products and (b) the nature of Ginkgo’s industry which requires certain technical personnel to be on-site in Ginkgo’s facilities. Ginkgo competes for qualified technical personnel with other life sciences and information technology companies, as well as academic institutions and research institutions in the markets in which Ginkgo operates, including Boston, Massachusetts, Cambridge, Massachusetts, Emeryville, California, Utrecht, Netherlands, Basel, Switzerland and Melbourne, Australia. In addition, as Ginkgo adds international operations, it will increasingly need to recruit qualified personnel outside the United States. However, doing so may also require Ginkgo to comply with laws to which Ginkgo is not currently subject, which could cause Ginkgo to allocate or divert capital, personnel and other resources from its organization, which could adversely affect its business, financial condition, results of operations, prospects and reputation. Establishing international operations and recruiting personnel has and may continue to be impacted by COVID-19 travel and operational restrictions. Ginkgo’s senior leadership team is critical to its vision, strategic direction, platform development, operations and commercial efforts. Its employees, including members of Ginkgo’s leadership team, could leave the company with little or no prior notice and would be free to work for a competitor. Ginkgo also does not maintain “key person” life insurance on any of its employees. The departure of one or more of Ginkgo’s founders, senior leadership team members or other key employees could be disruptive to its business until Ginkgo is able to hire qualified successors.

Ginkgo’s continued platform development, growth and commercial success depends, in part, on recruiting and retaining highly-trained personnel across various target industries and markets with the necessary background and ability to develop and use Ginkgo’s platform and to effectively identify and sell to current and new customers. New hires require significant training and, in most cases, take significant time before they achieve full productivity. Ginkgo’s failure to successfully hire and integrate these key personnel into its business could adversely affect its business. To attract top talent, Ginkgo believes it will need to offer competitive compensation and benefits packages, including equity incentive programs, which may require significant investment. If Ginkgo is unable to offer competitive compensation this may make it more difficult to attract and retain key employees. Moreover, if the perceived value of Ginkgo’s equity awards declines, it may adversely affect Ginkgo’s ability to attract and retain key employees. If Ginkgo does not maintain the necessary personnel to accomplish its business objectives, it may experience staffing constraints that adversely affect its ability to support its programs and operations.

In addition, some of Ginkgo’s personnel are qualified foreign nationals whose ability to live and work in the U.S. is contingent upon the continued availability of appropriate visas and whose ability to work on some of Ginkgo’s technologies may require the procurement of appropriate export licenses. Due to the competition for qualified personnel in the key markets in which Ginkgo operates, it expects to continue to utilize foreign nationals to fill part of Ginkgo’s recruiting needs. As a result, changes to United States immigration policies have and could further restrain the flow of technical and professional talent into the United States and adversely affect Ginkgo’s ability to hire and retain qualified personnel.

 

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Ginkgo’s business and results of operations are dependent on adequate access to laboratory and office space and suitable physical infrastructure, including electrical, plumbing, HVAC and network infrastructure, to conduct its operations. Ginkgo’s headquarters and laboratories are located in a flood zone in Boston’s Seaport District. If Ginkgo is unable to access enough space or experiences failures of its physical infrastructure, its business and results of operations could be adversely affected.

Ginkgo’s business depends on providing customers with technical services. In order to properly conduct its business, Ginkgo needs access to sufficient laboratory space and equipment to perform the activities necessary to advance and complete its programs. Additionally, Ginkgo needs to ensure that its laboratories and corporate offices remain operational at all times, which includes maintaining suitable physical infrastructure, including electrical, plumbing and HVAC, logistics and transportation systems and network infrastructure. Ginkgo leases its laboratories and office spaces and relies on the landlords for basic maintenance of its leased laboratories and office buildings. If one of Ginkgo’s landlords has not maintained a leased property sufficiently, Ginkgo may be forced into an early exit from the facility, which could be disruptive to its business. Furthermore, Ginkgo may continue to acquire laboratories not built by it in order to sufficiently scale and expand its output capacity. If Ginkgo discovers that these buildings and their infrastructure assets are not in the condition Ginkgo expected when they were acquired, Ginkgo may be required to incur substantial additional costs to repair or upgrade the laboratories.

Problems in and around one or more of Ginkgo’s laboratories or corporate offices, whether or not within Ginkgo’s control, could result in service interruptions or significant infrastructure or equipment damage. These could result from numerous factors, including:

 

   

human error;

 

   

equipment failure;

 

   

physical, electronic and cybersecurity breaches;

 

   

fire, earthquake, hurricane, flood, tornado and other natural disasters;

 

   

extreme temperatures;

 

   

flood and/or water damage;

 

   

fiber cuts;

 

   

power loss;

 

   

terrorist acts, including acts of bioterrorism;

 

   

sabotage, vandalism and cyberattacks; and

 

   

local epidemics or global pandemics such as the COVID-19 pandemic.

Ginkgo has timeline obligations to certain customers with respect to their programs. As a result, service interruptions or significant equipment damage in its laboratories could result in difficulty maintaining program timelines for these customers and potential claims related to such failures. Because the services Ginkgo provides in its laboratories are critical to many of its customers’ businesses, service interruptions or significant equipment damage in Ginkgo’s laboratories could also result in lost revenue or other indirect or consequential damages to its customers. Ginkgo cannot guarantee that a court would enforce any contractual limitations on its liability in the event that one of its customers brings a lawsuit against Ginkgo as a result of a problem at one of its laboratories and Ginkgo may decide to reach settlements with affected customers irrespective of any such contractual limitations. In addition, any loss of service, equipment damage or inability to meet Ginkgo service obligations could reduce the confidence of its customers and could consequently impair its ability to obtain and retain customers, which would adversely affect both Ginkgo’s ability to generate revenues and its operating results.

 

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Furthermore, Ginkgo is dependent upon Internet service providers, telecommunications carriers and other website operators, some of which have experienced significant system failures and electrical outages in the past.

Ginkgo’s customers may, in the future, experience difficulties due to system failures unrelated to Ginkgo’s systems and offerings. If, for any reason, these providers fail to provide the required services, Ginkgo’s business, financial condition and results of operations could be materially and adversely impacted.

Risks Related to Financial Reporting

Ginkgo relies on its customers, joint venturers, equity investees and other third parties to deliver timely and accurate information in order to accurately report its financial results in the time frame and manner required by law.

Ginkgo needs to receive timely, accurate, and complete information from a number of third parties in order to accurately report its financial results on a timely basis. If the information that Ginkgo receives is not accurate, its consolidated financial statements may be materially incorrect and may require restatement. Although Ginkgo has audit rights with these parties, performing such an audit could be expensive and time consuming and may not be adequate to reveal any discrepancies in a time frame consistent with its reporting requirements. As a result, Ginkgo may have difficulty completing accurate and timely financial disclosures, which could have an adverse effect on its business.

Ginkgo uses estimates in determining the fair value of certain assets and liabilities. If its estimates prove to be incorrect, Ginkgo may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect its financial position.

Ginkgo’s ability to measure and report its financial position and operating results is influenced by the need to estimate the fair value of an asset or liability. Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Ginkgo estimates the impact or outcome of future events on the basis of information available at the time of the financial statements. An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from management’s judgments and assumptions, then they may have an adverse impact on Ginkgo’s results of operations and cash flows.

Ginkgo’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

Ginkgo has incurred net losses since its inception and may never achieve or sustain profitability. Generally, for U.S. federal income tax purposes, net operating losses incurred will carry forward. However, net operating loss carryforwards generated prior to January 1, 2018 are subject to expiration for U.S. federal income tax purposes. As of December 31, 2021, Ginkgo had federal net operating loss carryforwards of approximately $665.2 million, of which $139.2 million begin to expire in 2029. Ginkgo has approximately $526.0 million of federal net operating losses as of December 31, 2021 that can be carried forward indefinitely. As of December 31, 2021, Ginkgo had state net operating loss carryforwards of approximately $529.3 million, of which $485.9 million begin to expire in 2029. Ginkgo has approximately $43.4 million of state net operating losses as of December 31, 2021 that can be carried forward indefinitely. As of December 31, 2021, Ginkgo had federal research and development tax credit carryforwards of approximately $23.3 million which begin to expire in 2029. As of December 31, 2021, Ginkgo also had state research and development and investment tax credit carryforwards of approximately $18.0 million which begin to expire in 2030.

 

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Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-ownership change net operating loss carryforwards and other pre-ownership change tax attributes, such as research tax credits, to offset its post-ownership change income or taxes may be limited. Similar provisions of state tax law may also apply to limit the use of Ginkgo’s state net operating loss carryforwards and other state tax attributes. Ginkgo has not performed an analysis to determine whether its past issuances of stock and other changes in its stock ownership may have resulted in one or more ownership changes. If it is determined that Ginkgo has in the past experienced an ownership change, or if Ginkgo undergoes one or more ownership changes as a result of future transactions in its stock, which may be outside its control, then its ability to utilize net operating loss carryforwards and other tax attributes may be materially limited. As a result, even if Ginkgo earns taxable income, it may be unable to use a material portion of its net operating loss carryforwards and other tax attributes, which could adversely affect future cash flows. There is also a risk that regulatory changes, such as suspensions on the use of net operating losses or other unforeseen reasons, may result in Ginkgo’s existing net operating loss carryforwards expiring or otherwise becoming unavailable to offset future taxable income. For these reasons, Ginkgo may not be able to utilize a material portion of its net operating loss carryforwards and other tax attributes even if it attains profitability.

If Ginkgo fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in Ginkgo’s financial and other public reporting, which would harm its business and the trading price of its common stock.

As a public reporting company, Ginkgo is subject to the rules and regulations established by the SEC and the NYSE. These rules and regulations require, among other things, that Ginkgo establish and periodically evaluate procedures with respect to its internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on Ginkgo’s financial and management systems, processes and controls, as well as on Ginkgo’s personnel, including senior management. In addition, as a public company, Ginkgo is required to document and test its internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that its management can certify as to the effectiveness of its internal control over financial reporting. Management’s initial certification under Section 404 of the Sarbanes-Oxley Act of 2002 will be required with Ginkgo’s Annual Report on Form 10-K for the year ending December 31, 2022. In support of such certifications, Ginkgo is required to document and make significant changes and enhancements, including potentially hiring additional personnel, to Ginkgo’s internal control over financial reporting. Likewise, Ginkgo’s independent registered public accounting firm is not required to attest to the effectiveness of Ginkgo’s internal control over financial reporting until its first annual report is required to be filed with the SEC following the date Ginkgo is no longer an emerging growth company. At such time as Ginkgo is required to obtain auditor attestation, if Ginkgo then has a material weakness, Ginkgo would receive an adverse opinion regarding its internal control over financial reporting from its independent registered accounting firm.

To achieve compliance with Section 404 within the prescribed period, Ginkgo will need to continue to dedicate internal resources, including hiring additional financial and accounting personnel and potentially engaging outside consultants. During Ginkgo’s evaluation of its internal control, if Ginkgo identifies one or more material weaknesses in its internal control over financial reporting, Ginkgo will be unable to assert that its internal control over financial reporting is effective. Ginkgo has identified material weaknesses in its internal control environment in the past and cannot provide assurances that there will not be material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit its ability to accurately report its financial condition, or results of operations. If Ginkgo is unable to conclude that its internal control over financial reporting is effective or if its independent registered public accounting firm determines Ginkgo has a material weakness or significant deficiency in its internal control over financial reporting, Ginkgo could lose investor confidence in the accuracy and completeness of its financial reports, the market price of shares of its common stock could decline, and Ginkgo could be subject to sanctions or investigations by NYSE, the SEC or other

 

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regulatory authorities. Failure to remedy any material weakness in Ginkgo’s internal control over financial reporting or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the capital markets.

Ginkgo has identified material weaknesses in its internal control over financial reporting in the past. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Ginkgo’s annual or interim financial statements will not be prevented or detected on a timely basis. If Ginkgo is unable to remediate these material weaknesses, or if Ginkgo identifies additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, Ginkgo may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect investor confidence in Ginkgo and, as a result, its stock price.

Ginkgo’s cash and cash equivalents could be adversely affected if the financial institutions in which it holds its cash and cash equivalents fail.

Ginkgo regularly maintains cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. While Ginkgo monitors the cash balances in its operating accounts on a daily basis and adjust the balances as appropriate, these balances could be impacted, and there could be a material adverse effect on its business, if one or more of the financial institutions with which Ginkgo deposits cash fails or is subject to other adverse conditions in the financial or credit markets. To date, Ginkgo has experienced no loss or lack of access to its invested cash or cash equivalents; however, Ginkgo can provide no assurance that access to its invested cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets.

Risks Related to Governmental Regulation and Litigation

Failure to comply with federal, state, local and international laws and regulations could adversely affect Ginkgo’s business and Ginkgo’s financial condition.

A variety of federal, state, local and international laws and regulations govern certain aspects of Ginkgo’s business. For example, Ginkgo maintains a registration from the U.S. Drug Enforcement Administration (“DEA”) for the research of certain controlled substances and permits from the Boston Public Health Commission to conduct work with recombinant DNA. Some of Ginkgo’s programs or products made or developed using its engineered cells and/or biomanufacturing processes are subject to regulations, including those promulgated by the FDA, DEA, EPA or USDA. Products utilized in Ginkgo’s COVID-19 testing services are subject to regulations promulgated by the FDA, the Centers for Medicare and Medicaid Services, and certain state governments. In addition, Ginkgo is subject to laws relating to, among other things, anti-bribery, insider trading, sourcing of biological materials and data privacy. The legal and regulatory requirements that apply to Ginkgo’s business may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or Ginkgo’s practices. As a result, Ginkgo’s practices may not comply, or may not comply in the future with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by Ginkgo to comply with any federal, state, local or international laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which Ginkgo may be subject or other legal obligations could adversely affect its reputation, brand and business, and may result in claims, proceedings or actions against Ginkgo by governmental entities or others or other liabilities or require Ginkgo to change its operations. Ginkgo may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations.

Ginkgo may also become subject to increasing regulation in the future as it expands its business. Ginkgo has limited experience operating a business located outside of Massachusetts. As Ginkgo continues to expand its operations and offerings domestically and globally, it will have to expend significant management and financial resources to maintain compliant practices in those locations. Non-compliance could lead to litigation, which would require substantial management and financial resources.

 

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Ginkgo may incur significant costs complying with environmental, health and safety laws and regulations, and failure to comply with these laws and regulations could expose Ginkgo to significant liabilities.

Ginkgo uses hazardous chemical and biological materials in its business and is subject to a variety of federal, state, local and international laws and regulations governing, among other matters, the use, generation, manufacture, transportation, storage, handling, disposal of, and human exposure to these materials, including regulation by governmental regulatory agencies, such as the Occupational Safety and Health Administration and the EPA. Ginkgo has incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of its business in complying with these laws and regulations.

Although Ginkgo has implemented safety procedures for storing, handling and disposing of these materials and waste products in an effort to comply with these laws and regulations, Ginkgo cannot be sure that its safety measures will be compliant or capable of eliminating the risk of injury or contamination from the generation, manufacturing, use, storage, transportation, handling, disposal of and human exposure to hazardous materials and/or flammable chemicals. Failure to comply with environmental, health and safety laws could subject Ginkgo to liability and resulting damages. There can be no assurance that violations of environmental, health and safety laws will not occur as a result of human error, accident, equipment failure, contamination, intentional misconduct or other causes. Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present or future laws could result in the imposition of fines, regulatory oversight costs, third party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production or a cessation of operations, and Ginkgo’s liability may exceed its total assets. Liability under environmental laws can be imposed for the full amount of damages without regard to comparative fault for the investigation and cleanup of contamination and impacts to human health and for damages to natural resources. Contamination at properties Ginkgo may own and operate and at properties to which Ginkgo sends hazardous materials, may result in liability for it under environmental laws and regulations.

Ginkgo’s business and operations may be affected by other new environmental, health and safety laws and regulations, which may require Ginkgo to change its operations, or result in greater compliance costs and increasing risks and penalties associated with violations, which could impair Ginkgo’s research, development or production efforts and harm its business.

If Ginkgo fails to comply with healthcare and other governmental regulations, Ginkgo could face substantial penalties and its business, financial condition and results of operations could be adversely affected.

Ginkgo’s business activities may be subject to regulation and enforcement by the FDA, DOJ, HHS, Office of Inspector General, and other federal and state governmental authorities. Although its offerings are not currently billed to any third-party payor, including any commercial payor or government healthcare program, Ginkgo may, in the future, submit claims for its COVID-19 testing services to third-party payors, including government healthcare programs. If Ginkgo submits claims to third-party payors, such activity will expand the scope of federal and state healthcare laws applicable to Ginkgo.

Federal and state healthcare laws and regulations that may affect Ginkgo’s ability to conduct business include, without limitation:

 

   

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or order of, any item or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits a physician, in the absence of an applicable exception, from making a referral for certain designated

 

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health services covered by the Medicare or Medicaid program, including clinical laboratory services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services. The Stark Law also prohibits the entity furnishing the designated health services from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral;

 

   

the federal civil false claims laws, including without limitation the federal False Claims Act (which can be enforced through “qui tam,” or whistleblower actions, by private citizens on behalf of the federal government), and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment of government funds, or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute or Stark Law constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

 

   

the Eliminating Kickbacks in Recovery Act (“EKRA”), which created a new federal crime for knowingly and willfully: (i) soliciting or receiving any remuneration in return for referring a patient to a recovery home, clinical treatment facility, or laboratory; or (ii) paying or offering any remuneration to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory. Unlike the Anti-Kickback Statute, EKRA is not limited to services reimbursable under a government health care program, but instead extends to all services reimbursed by “health care benefit programs”;

 

   

the healthcare fraud statutes under the Health Information Technology for Economic and Clinical Health Act (“HIPAA”), which impose criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

federal consumer protection and unfair competition laws, which broadly regulate platform activities and activities that potentially harm consumers; and

 

   

state law equivalents of each of the above federal laws, such as anti-kickback, self-referral, and fee-splitting, and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, exceptions, and safe harbors, it is possible that some of Ginkgo’s activities could be subject to challenge under one or more of such laws. Ginkgo may face claims and proceedings by private parties, and claims, investigations and other proceedings by governmental authorities, relating to allegations that its business practices do not comply with current or future laws or regulations involving applicable fraud and abuse or other healthcare laws and regulations, and it is possible that courts or governmental authorities may conclude that Ginkgo or any of Ginkgo’s partners have not complied with them, or that Ginkgo may find it necessary or appropriate to settle any such claims or other proceedings. Any action brought against Ginkgo for violation of these or other laws or regulations, even if Ginkgo successfully defends against it, could cause Ginkgo to incur significant legal expenses and divert its management’s attention from the operation of its business. If Ginkgo’s operations are found to be in violation of any federal or state laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to Ginkgo, Ginkgo may be subject to claims and

 

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proceedings by private parties, investigations and other proceedings by governmental authorities, as well as penalties, including significant criminal, civil and administrative penalties, damages and fines, disgorgement, additional reporting requirements and oversight if Ginkgo becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws or regulations, imprisonment for individuals and exclusion from participation in government programs, such as Medicare and Medicaid, as well as contractual damages and reputational harm. Ginkgo could also be required to curtail or cease its operations. In addition, if any customers, healthcare professionals Ginkgo engages, laboratory partners or other entities with whom Ginkgo does business are found not to be in compliance with applicable laws, they may be subject to the same criminal, civil or administrative sanctions, including exclusion from government-funded healthcare programs. Any of the foregoing could seriously harm Ginkgo’s business and financial results.

Ginkgo may become subject to the comprehensive laws and rules governing billing and payment, noncompliance with which could result in non-payment or recoupment of overpayments for Ginkgo’s services or other sanctions.

Ginkgo may, in the future, submit claims for its COVID-19 testing services to third-party payors. Payors typically have differing and complex billing and documentation requirements. If Ginkgo fails to comply with these payor-specific requirements, Ginkgo may not be paid for its services or payment may be substantially delayed or reduced. Numerous state and federal laws would also apply to Ginkgo’s claims for payment, including but not limited to (i) “coordination of benefits” rules that dictate which payor must be billed first when a patient has coverage from multiple payors, (ii) requirements that overpayments be refunded within a specified period of time, (iii) “reassignment” rules governing the ability to bill and collect professional fees on behalf of other providers, (iv) requirements that electronic claims for payment be submitted using certain standardized transaction codes and formats, and (v) laws requiring all health and financial information of patients to be maintained in a manner that complies with stringent security and privacy standards.

Audits, inquiries and investigations from government agencies and health network partners can occur from time to time in the ordinary course of Ginkgo’s business, and could result in costs to Ginkgo and a diversion of management’s time and attention. New regulations and heightened enforcement activity also could negatively affect Ginkgo’s cost of doing business and its risk of becoming the subject of an audit or investigation. If Ginkgo bills for its service in the future, its failure to comply with rules related to billing or adverse findings from audits by government and private payors could result in, among other penalties, non-payment for services rendered or recoupments or refunds of amounts previously paid for such services. Ginkgo cannot predict whether any future audits, inquiries or investigations, or the public disclosure of such matters, likely would negatively impact its business, financial condition, results of operations, cash flows and the trading price of its securities. See also “Risk Factors—Risks Related to Governmental Regulation and Litigation—If Ginkgo fails to comply with healthcare and other governmental regulations, Ginkgo could face substantial penalties and its business, financial condition and results of operations could be adversely affected.

Ginkgo and its laboratory partners are subject to a variety of laboratory testing standards, compliance with which is an expensive and time-consuming process, and any failure to comply could result in substantial penalties and disruptions to its business.

Ginkgo and the third-party laboratories that Ginkgo partners with are subject to the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”). CLIA is a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. CLIA requires virtually all laboratories to be certified by the federal government and mandates compliance with various operational, personnel, facilities administration, quality and proficiency testing requirements depending on the level of complexity for which the laboratory is certified. CLIA certification is also a prerequisite to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for laboratory testing services. Ginkgo’s partner laboratories hold CLIA certifications for high complexity testing, which mandate compliance with various operational, personnel, facilities

 

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administration, quality and proficiency testing requirements depending on the level of complexity for which the laboratory is certified. In addition, Ginkgo holds a CLIA high complexity testing certification and perform certain CLIA-waived tests on behalf of its clients, which subjects Ginkgo directly to certain CLIA requirements. Sanctions for failure to comply with CLIA requirements may include suspension, revocation, or limitation of a laboratory’s CLIA certificate, as well as the imposition of significant fines or criminal penalties. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing licensure, or Ginkgo’s partner laboratories’ failure to renew a CLIA certificate, a state or foreign license, or accreditation, could have a material adverse effect on Ginkgo’s business.

In addition, Ginkgo’s partner laboratories and Ginkgo’s laboratories holding CLIA Certificates of Waiver are subject to state laws and regulations governing laboratory licensure. Some states have enacted state licensure laws that are more stringent than CLIA. Ginkgo’s ability to successfully deploy COVID-19 testing at large scale may be adversely impacted if its partner laboratories do not maintain the required regulatory licensure and operate in accordance with CLIA standards. In certain markets such as California, New York, and Pennsylvania, Ginkgo or its partner laboratories may also need to obtain and maintain additional licensure from such states. It is uncertain that Ginkgo’s partner laboratories will be granted such licensure and, in such case, Ginkgo cannot offer testing to patients located in those states, which could limit its ability to offer testing on a wide scale.

It is possible that additional states may enact laboratory licensure requirements in the future, which could further limit Ginkgo’s ability to expand its services.

Ginkgo relies on third-party laboratories in the conduct of its biosecurity business offering. If any of Ginkgo’s partners cease working with it, or face supply chain disruptions or other difficulties, Ginkgo’s business could be harmed. Specifically, if any of Ginkgo’s partners were to lose or fail to obtain or renew their CLIA certifications or state laboratory licenses, whether as a result of a revocation, suspension or limitation, such laboratories would no longer be able to run the COVID-19 tests Ginkgo offers to its customers, and its ability to successfully deploy a COVID-19 pooled sample testing program nationwide may be adversely impacted.

The testing industry is subject to complex and costly regulation and if government regulations are interpreted or enforced in a manner adverse to Ginkgo, Ginkgo may be subject to enforcement actions, penalties, exclusion, and other material limitations on its operations.

Ginkgo offers COVID-19 testing services by partnering with third-party laboratories, diagnostic test manufacturers and manufacturers of collection kits, which are subject to extensive and frequently changing federal, state and local laws and regulations governing various aspects of Ginkgo’s business, including significant governmental certification and licensing regulations. New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, may also limit Ginkgo’s potential revenues, and Ginkgo may need to revise its R&D or commercialization programs. The costs of defending claims associated with violations, as well as any sanctions imposed, could significantly adversely affect Ginkgo’s financial performance.

Ginkgo is required to comply with federal and state genetic testing and privacy laws. Ginkgo has measures in place to collect clinical data and genetic and other biological samples, and disclose test results, from subjects who have provided appropriate informed consents. However, informed consents could be challenged in the future, and those informed consents could prove invalid, unlawful or otherwise inadequate for Ginkgo’s purposes. Any legal challenges could consume Ginkgo’s management and financial resources.

Current regulations governing the testing services Ginkgo offers are shifting and in some cases unclear. In addition, Ginkgo’s laboratory partners may be unsuccessful in validating, or obtaining or maintaining authorizations for, the tests Ginkgo relies on to provide COVID-19 testing services. If any third-party manufacturers or laboratories offering tests that Ginkgo uses in its testing services are deemed by the FDA or other regulatory authorities to have violated applicable law or if the tests or test components are marketed,

 

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processed or distributed in violation of applicable law, Ginkgo may be subject to enforcement action or litigation, or Ginkgo may be required to find alternative tests to support its testing services, which could increase its costs and prevent it from successfully commercializing its COVID-19 testing services.

In addition, Ginkgo is required to comply with applicable FDA regulations with respect to its distribution of certain COVID-19 diagnostic test kits and collection kits, including, for certain kits, compliance with applicable terms and conditions of an EUA. Such conditions may include requirements related to collection of information on the performance of the product, reporting of adverse events, recordkeeping requirements, and labeling and promotional activities. To the extent that Ginkgo markets or promotes third-party tests or test kits outside of the uses authorized for these products or in a false or misleading manner, the tests or collection kits could be considered misbranded or adulterated and in violation of applicable law.

Advertising for any of the tests or collection kits Ginkgo distributes or the testing services Ginkgo offers is also subject to regulation by the FTC, under the Federal Trade Commission Act (“FTC Act”). The FTC may take enforcement action for advertising claims that are not adequately substantiated or that are false or misleading. Violations of applicable FDA requirements could result in enforcement actions, such as warning or “untitled” letters, revocation of EUAs, seizures, injunctions, civil penalties and criminal prosecutions and fines, and violation of the FTC Act could result in injunctions and other associated remedies, all of which could have a material adverse effect on Ginkgo’s business. Most states also have similar regulatory and enforcement authority for laboratory testing and distribution of related collection kits. For example, many state laws require Ginkgo to hold a specific form of license to distribute COVID-19 diagnostic test kits and collection kits into such states. These requirements vary from one state to another and frequently change. Complying with state laws and regulations may subject Ginkgo to similar risks and delays as those Ginkgo could experience under federal regulation.

Ginkgo is subject to federal and state laws and regulations governing the protection, use, and disclosure of health information and other types of personal information, and its failure to comply with those laws and regulations or to adequately secure the information it hold could result in significant liability or reputational harm.

Numerous state and federal laws, regulations, standards and other legal obligations, including consumer protection laws and regulations, which govern the collection, dissemination, use, access to, confidentiality, security and processing of personal information, including health-related information, could apply to Ginkgo’s operations or the operations of its partners. For example, HIPAA imposes privacy, security and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities, and their covered subcontractors. HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of protected health information (“PHI”), including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI. If in the future Ginkgo engages in certain types of standard electronic transactions involving payors, including billing the Medicare or Medicaid programs or commercial health plans, Ginkgo will be subject to HIPAA as a “covered entity.” Ginkgo is currently subject to HIPAA as a “business associate” because Ginkgo performs certain services involving the use or disclosure of PHI on behalf of covered entity customers with respect to its COVID-19 testing service offerings. Implementation of the infrastructure necessary to meet HIPAA standards requires substantial investment. Being subject to HIPAA as a covered entity or business associate exposes Ginkgo to significant fines and penalties, including criminal fines and penalties.

Additionally, under HIPAA, covered entities must report breaches of unsecured PHI to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach by a covered entity or its agents. Notification also must be made to the HHS Office for Civil Rights and, in certain circumstances

 

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involving large breaches, to the media. Business associates must report breaches of unsecured PHI to covered entities within 60 days of discovery of the breach by the business associate or its agents. A non-permitted use or disclosure of PHI is presumed to be a breach under HIPAA unless the Covered Entity or Business Associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA.

Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue Ginkgo in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

Even when HIPAA or a state law does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair and/or deceptive acts or practices in violation of Section 5(a) of the FTC Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Several states have enacted privacy laws governing the use and disclosure of health information, such as the California Confidentiality of Medical Information Act; these laws are not preempted by HIPAA to the extent they are more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for Ginkgo and its partners. Further, in recent years, there have been a number of well-publicized data breaches involving the improper dissemination of personal information of individuals both within and outside of the healthcare industry. Laws in all 50 states require businesses to provide notice to individuals whose personally identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also constantly amending existing laws, and creating new data privacy and security laws, requiring attention to frequently changing regulatory requirements. For example, the California Consumer Privacy Act of 2018 (“CCPA”) went into effect on January 1, 2020. The CCPA creates new transparency requirements and grants California residents several new rights with respect to their personal information. Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages. On November 3, 2020, California voters passed a ballot initiative for the California Privacy Rights Act (“CPRA”), which will significantly expand the CCPA. Most CPRA provisions will take effect on January 1, 2023, though the obligations will apply to any personal information collected after January 1, 2022. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have been proposed or passed in other states, including the Virginia Consumer Data Protection Act, which will take effect on January 1, 2023. Ginkgo will need to invest substantial resources in putting in place policies and procedures to comply with these evolving state laws.

As Ginkgo’s operations and business grow, it may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. For example, the European Union General Data Protection Regulation (“GDPR”), which went into effect in May 2018,

 

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imposes strict requirements for processing the personal data of individuals within the European Economic Area. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain. For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union. Further, from January 1, 2021, companies have to comply with the GDPR and also the United Kingdom GDPR (the “UK GDPR”), which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term. On June 28, 2021, the European Commission adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United Kingdom without additional safeguards. However, the United Kingdom adequacy decision will automatically expire in June 2025 unless the European Commission renews or extends that decision and remains under review by the Commission during this period. These changes may lead to additional costs and increase Ginkgo’s overall risk exposure.

Although Ginkgo works to comply with applicable laws, regulations and standards, contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which Ginkgo must comply. Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the data-collection activities of various government agencies and in the number of private privacy-related lawsuits filed against companies. Any failure or perceived failure by Ginkgo or its employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to Ginkgo, damage its reputation, and adversely affect its business and results of operations.

Ginkgo has pursued in the past and may pursue additional U.S. government contracting and subcontracting opportunities in the future and as a U.S. government contractor and subcontractor, Ginkgo is subject to a number of procurement rules and regulations.

Ginkgo has entered into agreements with governmental entities and contractors in the past to serve as a U.S. government contractor or subcontractor and may do so again in the future. U.S. government procurement contractors and subcontractors must comply with specific procurement regulations and other requirements. These requirements, although customary in U.S. government contracts, could impact Ginkgo’s performance and compliance costs, including by limiting or delaying its ability to share information with business partners, customers and investors. The U.S. government has in the past and may in the future demand contract terms that are less favorable than standard arrangements with private sector customers and may have statutory, contractual, or other legal rights to terminate contracts with Ginkgo for convenience or for other reasons. Generally, U.S. government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the government’s convenience. Under general principles of government contracting law, if the government terminates a contract for convenience, the government contractor may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the government contractor is entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items from another source. Any termination for default may also adversely affect Ginkgo’s ability to contract with other government customers, as well as its reputation, business, financial condition and results of operations. In addition, changes in U.S. government budgetary priorities could lead to changes in the

 

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procurement environment, affecting availability of U.S. government contracting, subcontracting or funding opportunities, which could lead to modification, reduction or termination of Ginkgo’s U.S. government contracts or subcontracts. If and to the extent such changes occur, they could impact Ginkgo’s results and potential growth opportunities.

Furthermore, Ginkgo’s U.S. government contracts grant the government the right to use technologies developed by Ginkgo under the government contract or the right to share data related to its technologies, for or on behalf of the government. Under Ginkgo government contracts, Ginkgo may not be able to limit third parties, including its competitors, from accessing certain of these technology or data rights, including intellectual property, in providing products and services to the government.

In addition, failure by Ginkgo, its employees, representatives, contractors, partners, agents, intermediaries, other customers or other third parties to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, claims for damages, refund obligations, the assessment of civil or criminal penalties and fines, loss of rights in Ginkgo’s intellectual property and temporary suspension or permanent debarment from government contracting, all of which could negatively impact Ginkgo’s results of operations and financial condition. Any such damages, penalties, disruptions or limitations in Ginkgo’s ability to do business with the public sector could result in reduced sales of Ginkgo’s products, reputational damage, penalties and other sanctions, any of which could harm its business, reputation and results of operations.

Ginkgo is engaged in certain research activities involving controlled substances, including cannabinoids and other chemical intermediates, the making, use, sale, importation, exportation, and distribution of which may be subject to significant regulation by the DEA and other regulatory agencies.

Ginkgo is engaged in certain research activities involving the development of microbes designed to generate cannabinoids, their precursors and other chemical intermediaries, some of which may be regulated as controlled substances in the United States. Controlled substances are subject to state, federal, and foreign laws and regulations regarding their manufacture, use, sale, importation, exportation, and distribution. Among other things, controlled substances are regulated under the federal Controlled Substances Act of 1970 and implementing regulations of the DEA. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use and may generally not be marketed or sold in the United States. Schedule I substances are subject to the most stringent controls and Schedule V the least controls of the five schedules, based on their relative risk of abuse.

Cannabinoids are naturally occurring compounds found in the cannabis plant. The cannabis plant and its derivatives are highly regulated by the DEA and the USDA. Specifically, marihuana, which is defined as all parts of the plant Cannabis sativa L., whether growing or not, the seeds thereof, the resin extracted therefrom, and every compound, manufacture, salt, derivative, mixture, or preparation, is classified as a Schedule I controlled substance. However, the term does not include “hemp,” which means the cannabis plant and any part of that plant, including the seeds and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3% on a dry weight basis. Thus, depending on the THC concentration of the product, the product may or may not be regulated as a controlled substance. The DEA has historically regulated synthetic cannabinoids similarly to naturally-derived cannabinoids. Consequently, even though Ginkgo’s cannabinoids that could be produced from microbes may not be derived from the cannabis plant, the DEA may consider them to be controlled substances subject to stringent regulatory controls.

Regulations associated with controlled substances govern manufacturing, labeling, packaging, testing, dispensing, production and procurement quotas, recordkeeping, reporting, handling, shipment and disposal. These regulations include required security measures, such as background checks on employees and physical control of inventory and increase the personnel needs and the expense associated with development and

 

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commercialization of products or product candidates including controlled substances. Regulators conduct periodic inspections of entities involved in handling, manufacturing, or otherwise distributing controlled substances, and have broad enforcement authorities. If Ginkgo is found to be non-compliant with applicable controlled substance registrations and related requirements, Ginkgo may need to modify its business activities and/or stop handling or producing the products regulated as controlled substances, and could be subject to enforcement action, significant fines or penalties, and/or adverse publicity, among other consequences.

Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule substances, as well. The failure to comply with applicable regulatory requirements could lead to enforcement actions and sanctions from the states in addition to those from the DEA or otherwise arising under federal law.

Changes in government regulations may materially and adversely affect Ginkgo’s sales and results of operations.

The markets where Ginkgo provides its services are heavily influenced by foreign, federal, state and local government regulations and policies. The U.S. or foreign governments may take administrative, legislative, or regulatory action that could materially interfere with Ginkgo’s customer’s ability to sell products derived from engineered cells in certain countries and/or to certain customers. The uncertainty regarding future standards and policies may also affect Ginkgo’s ability to develop its programs or to license engineered cells to customers and to initiate new programs with its customers, which could have a material adverse effect on its business, financial condition and results of operations.

Changes in U.S. trade policy more generally could trigger retaliatory actions by affected countries, which could impose restrictions on Ginkgo’s ability to do business in or with affected countries or prohibit, reduce or discourage purchases of Ginkgo’s services by foreign customers, leading to increased program costs, increased costs of developing or manufacturing Ginkgo’s customers’ products and higher prices for their products in foreign markets. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of Ginkgo’s services or its customers’ products, cause its services to be less in demand and its sales to decline and adversely impact its ability to compete, which could materially and adversely impact Ginkgo’s business, financial condition and results of operations.

Ginkgo is subject to certain U.S. and foreign anti-corruption, anti-bribery and anti-money laundering laws and regulations. Ginkgo can face serious consequences for violations.

Ginkgo is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act and possibly other anti-corruption, anti-bribery and anti-money laundering laws and regulations in the jurisdictions in which Ginkgo does business, both domestic and abroad. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years. The FCPA and other anti-corruption laws generally prohibit companies, their employees, agents, representatives, business partners and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, anything of value to government officials, political parties, or candidates for public office for the purpose of obtaining or retaining business or securing an improper business advantage. The UK Bribery Act and other anti-corruption laws also prohibit commercial bribery not involving government officials, and requesting or accepting bribes; and anti-money laundering laws prohibit engaging in certain transactions involving criminally-derived property or the proceeds of criminal activity.

Ginkgo and its third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or -affiliated universities or other entities (for example, to obtain necessary permits, licenses, patent registrations and other regulatory approvals), which increases its risks under the FCPA and other anti-corruption laws. Ginkgo also engages contractors, consultants and other third parties from time to time to conduct business development activities

 

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abroad. Ginkgo may be held liable for the corrupt or other illegal activities of its employees or third parties even if it does not explicitly authorize such activities. Ginkgo has increased and, in the future, expects its non-U.S. activities to increase over time, which may also increase its exposure under these laws.

The FCPA also requires that Ginkgo keep accurate books and records and maintain a system of adequate internal controls. While Ginkgo has controls to address compliance with such laws, and will continue to review and enhance its compliance program, Ginkgo cannot assure you that its employees, agents, representatives, business partners or third-party intermediaries will always comply with its policies and applicable law, for which Ginkgo may be ultimately held responsible.

Any allegations or violation of the FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws may result in whistleblower complaints, sanctions, settlements, investigations, prosecution, enforcement actions, substantial criminal fines and civil penalties, disgorgement of profits, imprisonment, debarment, tax reassessments, breach of contract and fraud litigation, loss of export privileges, suspension or debarment from U.S. government contracts, adverse media coverage, reputational harm and other consequences, all of which may have an adverse effect on Ginkgo’s reputation, business, financial condition, results of operations and prospects. Responding to an investigation or action can also result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Significant disruptions to Ginkgo’s and its service providers’ information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to Ginkgo.

Ginkgo is increasingly dependent on information technology systems and infrastructure, including services licensed, leased or purchased from third parties such as cloud computing infrastructure and operating systems, to operate its business. In the ordinary course of business, Ginkgo collects, stores, processes and transmits large amounts of sensitive information, including intellectual property, proprietary business information, personal information and other confidential information. It is critical that Ginkgo does so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. Ginkgo has also outsourced elements of its operations (including elements of its information technology infrastructure) to third parties, and as a result, manages a number of third-party vendors who may have access to its networks or its confidential information. While Ginkgo takes measures to safeguard and protect this information, threats to network and data security are increasingly diverse and sophisticated. Ginkgo may also face increased cybersecurity risks due to its reliance on Internet technology and the number of its employees working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Despite Ginkgo’s efforts, training and processes to prevent security breaches and incidents, its information technology systems, servers, and those of third parties that Ginkgo uses in its operations are vulnerable to cybersecurity risks, including cyberattacks such as viruses and worms, phishing attacks and other forms of social engineering, denial-of-service attacks, ransomware attacks, physical or electronic break-ins, third-party or employee theft or misuse, and other negligent actions, errors or malfeasance by employees or other third parties, and similar disruptions from unauthorized tampering with its servers and computer systems or those of third parties that Ginkgo uses in its operations, which could lead to interruptions, delays, loss or corruption of critical data, unauthorized access to or acquisition of health-related and other personal information. In addition, Ginkgo may be the target of email scams and other social engineering attacks that attempt to acquire personal information or company assets or access to its systems. Despite Ginkgo’s efforts to create security barriers to such threats, Ginkgo may not be able to entirely mitigate these risks. Ginkgo’s third-party service providers face similar risks. Any cyberattack that attempts to obtain Ginkgo’s data or assets, including data that Ginkgo maintains on behalf of its customers, disrupt its service, or otherwise access its systems, or those of third parties Ginkgo uses, or any other security breach or incident, could adversely affect its business, financial condition and operating results, be expensive to remedy, and damage its reputation. Ginkgo and its third-party service providers may face difficulties or delays in identifying or otherwise responding to any attacks or actual or potential security breaches or security incidents. Ginkgo may incur significant costs and operational consequences of investigating, remediating, eliminating and putting in

 

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place additional tools and devices designed to prevent actual or perceived security breaches and other security incidents, including in response to any actual or perceived incident Ginkgo may suffer, and substantial costs to comply with any notification or other legal obligations resulting from any security breaches or other security incidents. In addition, any such breaches or incidents, or the perception that they have occurred, may result in negative publicity, and could have an adverse effect on Ginkgo’s business, financial condition, and operating results.

Although Ginkgo maintains insurance coverage that may cover certain liabilities in connection with security breaches and other security incidents, Ginkgo cannot be certain its insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to it on commercially reasonable terms (if at all) or that any insurer will not deny coverage as to any future claim.

Governmental trade controls, including export and import controls, sanctions, customs requirements and related regimes, could subject Ginkgo to liability or loss of contracting privileges or limit Ginkgo’s ability to compete in certain markets.

Ginkgo’s programs and technologies are subject to U.S. and non-U.S. export controls. Export authorizations may be required for biotechnology products, technologies, or services to be exported outside of the United States, to a foreign person, or outside of a foreign jurisdiction. Ginkgo’s current or future programs or technologies are, and may in the future, be subject to the Export Administration Regulations (“EAR”). If a program, technology, or service meets certain criteria for control under the EAR, then that engineered cell, production process, resulting product, technology, or service would be exportable outside the United States or to a foreign person or from one foreign jurisdiction to another foreign jurisdiction only if Ginkgo obtains the applicable export license or other applicable authorization including qualifying for a license exception, if required. Compliance with the U.S. and foreign export laws and regulations and other applicable regulatory requirements regarding the sales, shipment and use of Ginkgo’s engineering cells, bioprocesses and other technology may affect Ginkgo’s ability to work with foreign partners, affect the speed at which Ginkgo can introduce new products into non-U.S. markets, or limit its ability to sell programs or services or license technologies into some countries.

Additionally, certain materials that Ginkgo uses in its programs are subject to U.S. import controls. Ginkgo currently has, and may in the course of business need to procure, certain import authorizations, for example, related to plant pests, chemicals, biological agents and other controlled materials, including from the USDA, EPA and CDC. Compliance with applicable regulatory requirements regarding the import of such materials may limit Ginkgo’s access to materials critical to its development activities or affect the speed at which Ginkgo can advance new programs.

Ginkgo’s activities are also subject to the economic sanctions laws and regulations of the United States and other jurisdictions. Such controls prohibit certain transactions, potentially including financial transactions and the transfer of products, technologies and services, to sanctioned countries, governments and persons, without a license or other appropriate authorization. U.S. sanctions policy changes could affect Ginkgo or its customers’ ability to interact, directly and indirectly, with targeted companies or companies in sanctioned countries.

While Ginkgo takes precautions to comply with U.S. and non-U.S. export control, import control and economic sanctions laws and regulations, it cannot guarantee that such precautions will prevent violations of such laws, including transfers to unauthorized persons or destinations, and including inadvertent violations as a result of a misclassification of a product, technology or service under export control laws. Violations could result in Ginkgo’s business being subject to government investigations, denial of export or import privileges, significant fines or penalties, denial of government contracts and reputational harm. Any limitation on Ginkgo’s ability to export its engineered cells, production processes, resulting products, technology, or services, or import materials critical to its programs would likely adversely affect its business and financial condition.

 

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Changes in U.S. and foreign tax laws could have a material adverse effect on its business, cash flow, results of operations or financial condition.

Ginkgo is subject to income and non-income based taxes in the U.S. and foreign jurisdictions. Changes in tax laws, regulations and policies, or their interpretation and application, in the jurisdictions where Ginkgo is subject to tax, could have a material adverse effect on its business, cash flow, results of operations or financial condition. The U.S. Congress continually debates changes to U.S. corporate income tax laws, which could result in significant changes to these laws. In addition, the Group of Twenty (G20), the Organization for Economic Co-operation and Development (OECD), the European Commission (EC) and individual taxing jurisdictions have published proposals covering various international tax-related issues, including country-by-country reporting, permanent establishment rules, transfer pricing and tax treaties. It is possible that any future tax legislation that may be enacted could materially impact Ginkgo’s effective tax rate and cash tax liability as well as tax credits and incentives.

Ginkgo may become subject to lawsuits or indemnity claims in the ordinary course of business, which could materially and adversely affect its business and results of operations.

From time to time, Ginkgo may in the ordinary course of business be named as a defendant in lawsuits, indemnity claims and other legal proceedings. These actions may seek, among other things, compensation for alleged product liability, personal injury, employment discrimination, breach of contract, property damage and other losses or injunctive or declaratory relief.

The marketing, sale and use of Ginkgo’s services engineered cells, production processes and resulting products could lead to the filing of product liability claims were someone to allege that Ginkgo’s services, engineered cells, production processes or resulting products failed to perform as designed or intended or caused injury or other harms. A product liability claim could result in substantial damages and be costly and time-consuming for Ginkgo to defend.

Regardless of merit or eventual outcome, product liability claims may result in:

 

   

decreased demand for programs and resulting products;

 

   

loss of revenue;

 

   

substantial monetary payments;

 

   

significant time and costs to defend related litigation;

 

   

the inability to commercialize any products from Ginkgo’s programs; and

 

   

injury to Ginkgo’s reputation and significant negative media attention.

In the event that such actions, claims or proceedings are ultimately resolved unfavorably to Ginkgo at amounts exceeding its accrued liability, or at material amounts, the outcome could materially and adversely affect its business and results of operations. In addition, payments of significant amounts, even if reserved, could adversely affect its liquidity position. Ginkgo maintains product liability insurance, but this insurance may not fully protect Ginkgo from the financial impact of defending against product liability claims. Any product liability claim brought against Ginkgo, with or without merit, could increase its insurance rates or prevent Ginkgo from securing insurance coverage in the future. Additionally, any product liability lawsuit could cause current collaborators to terminate existing agreements or potential collaborators to seek other companies, any of which could impact Ginkgo’s business and results of operations.

Ginkgo’s business could be adversely affected by legal challenges to its telehealth partner’s business model.

Certain of Ginkgo’s COVID-19 biosecurity offerings rely significantly on healthcare provider orders for testing that are placed on the basis of telemedicine encounters. The ability to conduct telehealth services in a

 

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particular state is directly dependent upon the applicable laws governing remote healthcare, the practice of medicine and healthcare delivery in general in such location which are subject to changing political, regulatory and other influences. With respect to telehealth services, state medical boards continue to implement new rules or interpret existing rules in a manner that may limit or restrict the ability of the centers to conduct their business as it has been conducted in the past. Additionally, during the COVID-19 public health emergency, many states enacted waivers and adopted other temporary measures that lifted certain restrictions on out-of-state providers and relaxed licensure requirements to allow greater access to telehealth services during the public health emergency period. At this time, Ginkgo cannot predict whether these waivers or temporary measures will remain in place after the end of the public health emergency period. Accordingly, Ginkgo must monitor compliance with laws in every jurisdiction in which Ginkgo operates, and Ginkgo cannot provide assurance that government authorities may nonetheless challenge Ginkgo’s activities and arrangements with its telehealth partner and consider them non-compliant. Additionally, it is possible that the laws and rules governing the practice of medicine, including remote healthcare, in one or more jurisdictions may change in a manner deleterious to Ginkgo’s business. If a successful legal challenge or an adverse change in the relevant laws were to occur, and Ginkgo is unable to adapt its business model accordingly, its operations as well as the operations of its telehealth partner in the affected jurisdictions would be disrupted, which could have a material adverse effect on its business, financial condition and results of operations.

Risks Related to Ginkgo’s Common Stock, Organizational Structure and Governance

Ginkgo is not, and do not intend to become, regulated as an “investment company” under the Investment Company Act, and if Ginkgo were deemed an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for Ginkgo to continue its business as contemplated and could have a material adverse effect on its business.

An entity generally will be deemed to be an “investment company” for purposes of the Investment Company Act if:

 

   

it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

 

   

it is an inadvertent investment company because, absent an applicable exemption, (i) it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, or (ii) it owns or proposes to acquire investment securities having a value exceeding 45% of the value of its total assets (exclusive of U.S. government securities and cash items) and/or more than 45% of its income is derived from investment securities on a consolidated basis with its wholly owned subsidiaries.

Ginkgo believes that it is engaged primarily in the business of providing cell engineering services to customers from across a variety of industries and not in the business of investing, reinvesting or trading in securities. Ginkgo holds itself out as a synthetic biology company and does not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, Ginkgo does not believe that it is an “orthodox” investment company as defined in Section 3(a)(1)(A) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) and described in the first bullet point above. Furthermore, Ginkgo believes that less than 40% of Ginkgo’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will be composed of assets that could be considered investment securities. Accordingly, Ginkgo does not believe that it is an inadvertent investment company by virtue of the 40% tests in Section 3(a)(1)(C) of the Investment Company Act as described in the second bullet point above. In addition, Ginkgo believes that it is not an investment company under Section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business.

The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder

 

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limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. Ginkgo intends to conduct its operations so that it will not be deemed to be an investment company under the Investment Company Act or otherwise conduct its business in a manner that does not subject it to the registration and other requirements of the Investment Company Act. In order to ensure that Ginkgo is not deemed to be an investment company, Ginkgo may be limited in the assets that it may continue to own and, further, may need to dispose of or acquire certain assets at such times or on such terms as may be less favorable to Ginkgo than in the absence of such requirement. If anything were to happen which would cause Ginkgo to be deemed to be an investment company under the Investment Company Act (such as significant changes in the value of Ginkgo’s programs or a change in circumstance that results in a reclassification of its interests in its programs for purposes of the Investment Company Act), the requirements imposed by the Investment Company Act could make it impractical for Ginkgo to continue its business as currently conducted, which would materially adversely affect its business, financial condition and results of operations. In addition, if Ginkgo were to become inadvertently subject to the Investment Company Act, any violation of the Investment Company Act could subject it to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of Ginkgo’s contracts could be deemed unenforceable.

Only Ginkgo’s employees and directors are entitled to hold shares of Ginkgo Class B Common Stock (including shares of Ginkgo Class B Common Stock granted or otherwise issued to Ginkgo employees and directors in the future), which shares have 10 votes per share. This limits or precludes other stockholders’ ability to influence the outcome of matters submitted to stockholders for approval, including the election of directors, the approval of certain employee compensation plans, the adoption of certain amendments to Ginkgo’s organizational documents and the approval of any merger, consolidation, sale of all or substantially all of its assets, or other major corporate transaction requiring stockholder approval.

Shares of Ginkgo Class B Common Stock have 10 votes per share, whereas shares of Ginkgo Class A Common Stock have one vote per share and shares of Ginkgo Class C Common Stock have no voting rights (except as otherwise expressly provided in the Ginkgo Charter or required by applicable law). As of June 30, 2022, Ginkgo’s directors and executive officers hold in the aggregate approximately 49.2% of the total voting power of its outstanding capital stock, and its directors, founders and executive officers hold in the aggregate approximately 68.7% of the total voting power of its outstanding capital stock. Accordingly, holders of shares of Ginkgo Class B Common Stock are able to significantly influence the outcome of matters submitted to Ginkgo’s stockholders for approval, including the election of directors, the approval of certain employee compensation plans, the adoption of amendments to Ginkgo’s organizational documents and the approval of any merger, consolidation, sale of all or substantially all of Ginkgo’s assets or other major corporate transaction requiring stockholder approval. This concentrated voting power limits or precludes other stockholders’ ability to influence the outcome of these matters. Holders of Ginkgo Class B Common Stock may have interests that differ from holders of Ginkgo Class A Common Stock and may vote in a way with which holders of Ginkgo Class A Common Stock disagree and which may be adverse to the interests of holders of Ginkgo Class A Common Stock. This concentrated voting power is likely to have the effect of limiting the likelihood of an unsolicited merger proposal, unsolicited tender offer or proxy contest for the removal of directors. As a result, Ginkgo’s governance structure and Ginkgo Charter may have the effect of depriving its stockholders of an opportunity to sell their shares at a premium over prevailing market prices and make it more difficult to replace Ginkgo’s directors and management. Furthermore, this concentrated voting power could discourage a potential investor from acquiring Ginkgo Class A Common Stock due to the limited voting power of such stock relative to Ginkgo Class B Common Stock, which could also adversely affect the trading price of Ginkgo Class A Common Stock.

Ginkgo’s multi-class stock structure is intended to preserve its existing founder-led governance structure, to promote employee retention and engagement, to facilitate continued innovation and the risk-taking that it requires, to permit Ginkgo to continue to prioritize its long-term goals rather than short-term results, to enhance the likelihood of continued stability in the composition of the Ginkgo Board and its policies, and to discourage certain types of transactions that may involve an actual or threatened acquisition of the company, all of which

 

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Ginkgo believes are essential to the long-term success of the company and to long-term stockholder value. Ginkgo expects to maintain this concentrated voting power among its founders and employees for the foreseeable future, including by issuing additional shares of Ginkgo Class B Common Stock to its employees pursuant to its equity compensation plans.

Future transfers of shares of Ginkgo Class B Common Stock to persons other than Ginkgo directors and employees, or trusts or legal entities through which the right to vote the shares of Ginkgo Class B Common Stock held thereby is exercised exclusively by one or more of Ginkgo’s directors or employees (any such director, employee, trust or legal entity, a “Class B Eligible Holder”), or the holder of shares of Ginkgo Class B Common Stock ceasing to be a Class B Eligible Holder, will generally result in those shares converting to shares of Ginkgo Class A Common Stock on a one-to-one basis, subject to certain exceptions and unless a majority of the independent directors of the Ginkgo Board determine that such transfer or event will not result in such automatic conversion. Each share of Ginkgo Class B Common Stock is also convertible at any time at the option of the holder into one share of Ginkgo Class A Common Stock. The conversion of Ginkgo Class B Common Stock to Ginkgo Class A Common Stock over time will have the effect of increasing the relative voting power of those holders of Ginkgo Class B Common Stock who retain their shares of Ginkgo Class B Common Stock in the long term. As a result, the relative voting power of holders of Ginkgo Class A Common Stock is expected to remain limited for a significant period of time, and it is possible that one or more of the persons or entities holding Ginkgo Class B Common Stock could gain significant voting control as other holders of Ginkgo Class B Common Stock sell or otherwise convert their shares into Ginkgo Class A Common Stock. In addition, the conversion of Ginkgo Class B Common Stock to Ginkgo Class A Common Stock would dilute holders of Ginkgo Class A Common Stock in terms of voting power within the Ginkgo Class A Common Stock. Because holders of Ginkgo Class C Common Stock have no voting rights (except as otherwise expressly provided in the Ginkgo Charter or required by applicable law), the holders of Ginkgo Class B Common Stock may be able to significantly influence the outcome of matters submitted to Ginkgo’s stockholders for approval for a longer period of time than would be the case if Ginkgo issued Ginkgo Class A Common Stock rather than Ginkgo Class C Common Stock in such transactions. For information regarding Ginkgo’s capital structure and Ginkgo’s stockholders, see “Information About Ginkgo—Description of Ginkgo’s Capital Stock” and “—Market Information, Stockholders and Dividends of Ginkgo” beginning on pages 271 and 251 of this proxy statement/prospectus.

Ginkgo’s share price may change significantly over time, and you may not be able to resell its common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.

The trading price of Ginkgo Class A Common Stock has been in the past and is likely to continue to be volatile. Such volatility may be, in part, attributable to:

 

   

future sales of Ginkgo Class A Common Stock or other securities by Ginkgo or its existing stockholders, or the perception of such future sales;

 

   

results of operations of the company or its competitors that vary from the expectations of securities analysts and investors;

 

   

changes in expectations as to Ginkgo’s future financial performance and growth, including assessments of its business, prospects, financial estimates and investment recommendations by securities analysts, investors and short sellers;

 

   

additions or departures of key management personnel or members of the Ginkgo Board;

 

   

announcements by Ginkgo or its competitors of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments;

 

   

announcements relating to actual or potential civil and non-civil litigation, as well as governmental or regulatory investigations or inquiries;

 

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guidance that Ginkgo provide to the public, any changes in this guidance or its failure to meet this guidance;

 

   

changes in the perception of Ginkgo offerings or the synthetic biology industry more general including changes in regulatory conditions;

 

   

the development and sustainability of an active trading market for Ginkgo Class A Common Stock;

 

   

changes in accounting principles;

 

   

changes in general economic or market conditions or trends in Ginkgo’s industry or markets; and

 

   

other events or factors, including those resulting from natural disasters, pandemics, epidemics, war (including Russia’s invasion of Ukraine), acts of terrorism or responses to these events.

These factors among others may materially adversely affect the market price of Ginkgo Class A Common Stock, regardless of its actual operating performance. In addition, price volatility may be greater if the public float and trading volume of Ginkgo Class A Common Stock are low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If Ginkgo was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from its business regardless of the outcome of such litigation.

Future sales, or the perception of future sales, by Ginkgo or its stockholders in the public market could cause the market price for its securities to decline.

The sale of Ginkgo’s securities in the public market, including by entities to which we have issued shares in connection with transactions, or the perception that such sales could occur, could harm the prevailing market price of its securities. These sales, or the possibility that these sales may occur, also might make it more difficult for Ginkgo to sell equity securities in the future at a time and at a price that Ginkgo deems appropriate.

As of the consummation of the SRNG Business Combination (as defined below), Ginkgo had a total of approximately 1,959 million shares of common stock outstanding on a fully-diluted basis, consisting of approximately 1,333 million shares of Ginkgo Class A Common Stock and approximately 626 million shares of Ginkgo Class B Common Stock. All shares issued in connection with the SRNG Business Combination are freely tradable without registration under the Securities Act, and without restriction by persons other than its “affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including Ginkgo’s directors, executive officers and other affiliates. Of these shares, approximately 631 million shares of common stock outstanding on a fully-diluted basis are subject to a one-year lock-up, which is scheduled to expire on September 16, 2022. In addition to the above, there are up to approximately 206 million shares of common stock that may be earned if the trading price is greater than or equal to the earnout price threshold in the table below for any point in a trading day during 20 trading days in a 30 consecutive trading day period, of which approximately 51.5 million shares were earned as of June 30, 2022. The vast majority of the shares that are part of the earnout will not be subject to lock-up once the earnout conditions are met.

 

Earnout Price Threshold    Number of Shares Earned  

$12.50 (earnout condition has been met)

     Approximately 51.5 million  

$15.00

     Approximately 51.5 million  

$17.50

     Approximately 51.5 million  

$20.00

     Approximately 51.5 million  

In connection with the SRNG Business Combination, in September 2021, Jason Kelly, Reshma Shetty, Austin Che and Bartholomew Canton were each granted 21,458,317 restricted stock units, pursuant to Founder Equity Grant Agreements dated January 1, 2020. Each named founder agreed to extend the vesting on these restricted stock units and their 4,324,037 restricted stock units granted in 2020 such that these restricted stock

 

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units and their associated earnout shares will not fully vest until October 1, 2022, and such vesting is subject to the founder’s continued service at Ginkgo through such date. When those restricted stock units and earnouts vest, if any of such shares are sold into the market (including to cover the income tax obligations associated with this vesting event or otherwise), such sales could harm the prevailing market price of Ginkgo securities.

In addition, the shares of Ginkgo’s common stock reserved for future issuance under its equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. The compensation committee of the Ginkgo Board may determine the exact number of shares to be reserved for future issuance under its equity incentive plans at its discretion. Ginkgo is expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of Ginkgo Class A Common Stock or securities convertible into or exchangeable for shares of Ginkgo Class A Common Stock issued pursuant to its equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

Short sellers may engage in manipulative activity intended to drive down the market price of Ginkgo Class A Common Stock, which could also result in related regulatory and governmental scrutiny, among other effects.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of later buying lower priced identical securities to return to the lender. Accordingly, it is in the interest of a short seller of Ginkgo Class A Common Stock for the price to decline. At any time, short sellers may publish, or arrange for the publication of, opinions or characterizations that are intended to create negative market momentum. Issuers, like Ginkgo, whose securities have historically had limited trading history or volumes and/or have been susceptible to relatively high volatility levels can be vulnerable to such short seller attacks. Short selling reports can cause increased volatility in an issuer’s stock price, and result in regulatory and governmental inquiries. On October 6, 2021, such a report was published about Ginkgo. Shortly after, Ginkgo received a preliminary and informal inquiry from the DOJ related to such report. Any related inquiry or formal investigation from a governmental organization or other regulatory body, including any inquiry from the SEC, could result in a material diversion of Ginkgo’s management’s time and could have a material adverse effect on its business and results of operations.

The Ginkgo Charter authorizes a large number of shares of Ginkgo Class B Common Stock for issuance in the future. The future issuance of shares of Ginkgo Class B Common Stock may have the effect of further concentrating voting power with its employees and other Class B stockholders, and could have an adverse effect on the trading price of Ginkgo Class A Common Stock.

Under the Ginkgo Charter, Ginkgo is authorized to issue 4,500,000,000 shares of Ginkgo Class B Common Stock, which are entitled to ten votes per share. Ginkgo currently intends to issue additional shares of Ginkgo Class B Common Stock in the future to existing and newly hired employees pursuant to its equity compensation plans. Ginkgo’s authorized but unissued shares of Ginkgo Class B Common Stock are available for issuance to Class B Eligible Holders with the approval of the Ginkgo Board without stockholder approval, except as may be required by the listing rules of the NYSE. In addition, Ginkgo’s authorized but unissued shares of Ginkgo Class B Common Stock are available for issuance to persons other than Class B Eligible Holders only with the approval of a majority of its directors elected by the holders of Ginkgo Class B Common Stock, voting separately as a class. If Ginkgo issues additional shares of Ginkgo Class B Common Stock in the future, holders of shares of Ginkgo Class A Common Stock, which are entitled to one vote per share, will experience disproportionate voting power dilution relative to economic dilution, and the holders of Ginkgo Class B Common Stock may be able to significantly influence the outcome of matters submitted to Ginkgo stockholders for approval for a longer period of time than would be the case if Ginkgo issued shares of Ginkgo Class A Common Stock.

See “Risk Factors—Risks Relating to Ginkgo’s Common Stock, Organizational Structure and Governance—Only Ginkgo’s employees and directors are entitled to hold shares of Ginkgo Class B Common Stock (including

 

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shares of Ginkgo Class B Common Stock granted or otherwise issued to Ginkgo’s employees and directors in the future), which shares have ten votes per share. This limits or precludes other stockholders’ ability to influence the outcome of matters submitted to stockholders for approval, including the election of directors, the approval of certain employee compensation plans, the adoption of certain amendments to Ginkgo’s organizational documents and the approval of any merger, consolidation, sale of all or substantially all of its assets or other major corporate transaction requiring stockholder approval.”

Under the Ginkgo Charter, Ginkgo is authorized to issue 800,000,000 shares of Ginkgo Class C Common Stock, which have no voting rights (except as otherwise expressly provided in the Charter or required by applicable law). Outstanding Ginkgo Class C Common Stock may have the effect of extending voting power in Ginkgo Class B Common Stock, and may discourage potential acquisitions of its business and could have an adverse effect on the trading price of Ginkgo Class A Common Stock.

Under the Ginkgo Charter, Ginkgo is authorized to issue 800,000,000 shares of Ginkgo Class C Common Stock, which have no voting rights (except as required by law). Ginkgo Class C Common Stock may be used for a variety of corporate purposes, including financings, acquisitions and investments. Ginkgo’s authorized but unissued shares of Ginkgo Class C Common Stock are available for issuance with the approval of the Ginkgo Board without stockholder approval, except as may be required by the Listing Rules of the NYSE. Because the Ginkgo Class C Common Stock carries no voting rights (except as otherwise expressly provided in the Ginkgo Charter or required by applicable law), is not convertible into any other capital stock, and is not listed for trading on an exchange or registered for sale with the SEC, shares of Ginkgo Class C Common Stock may be less liquid and less attractive to any future recipients of these shares than shares of Ginkgo Class A Common Stock, although Ginkgo may seek to list the Ginkgo Class C Common Stock for trading and register shares of Ginkgo Class C Common Stock for sale in the future. In addition, because Ginkgo Class C Common Stock has no voting rights (except as otherwise expressly provided in the Ginkgo Charter or required by applicable law), the holders of Ginkgo Class B Common Stock may be able to significantly influence the outcome of matters submitted to Ginkgo’s stockholders for approval for a longer period of time than would be the case if Ginkgo issued Ginkgo Class A Common Stock rather than Ginkgo Class C Common Stock in such transactions. In addition, further issuances of Ginkgo Class C Common Stock would have a dilutive effect on the economic interests of Ginkgo Class A Common Stock and Ginkgo Class B Common Stock. Any such issuance could also cause the trading price of Ginkgo Class A Common Stock to decline.

Ginkgo cannot predict the effect the multi-class structure of its common stock may have on the trading price of Ginkgo Class A Common Stock.

The holding of low-voting stock, such as Ginkgo Class A Common Stock, may not be permitted by the investment policies of certain institutional investors or may be less attractive to the portfolio managers of certain institutional investors. In addition, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. In July 2017, S&P Dow Jones announced that they would cease to allow most newly public companies with dual- or multi-class capital structures to be included in their indices. Affected indices include the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. Under the announced policies, Ginkgo’s multi-class capital structure would make Ginkgo Class A Common Stock ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices would not invest in its common stock. These policies may depress Ginkgo’s valuation compared to those of other similar companies that are included. Because of Ginkgo’s multi-class stock structure, Ginkgo Class A Common Stock will likely continue to be excluded from certain of these indices, and Ginkgo cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude investment by many of these funds in Ginkgo Class A Common Stock and could make shares of Ginkgo Class A Common Stock less attractive to other investors. As a result, the trading price of shares of Ginkgo Class A Common Stock could be adversely affected.

 

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Ginkgo’s focus on the long-term best interests of its company and its consideration of all of its stakeholders, including Ginkgo’s stockholders, workforce, customers, suppliers, academic researchers, governments, communities and other stakeholders that it may identify from time to time, may conflict with short-term or medium-term financial interests and business performance, which may adversely impact the value of Ginkgo Class A Common Stock.

Ginkgo believes that focusing on the long-term best interests of the company and its consideration of all of its stakeholders, including its stockholders, workforce, customers, suppliers, academic researchers, governments, communities and other stakeholders Ginkgo may identify from time to time, is essential to the long-term success of the company and to long-term stockholder value. Therefore, Ginkgo has made decisions, and may in the future make decisions, that it believes are in the long-term best interests of the company and its stockholders, even if such decisions may negatively impact the short- or medium-term performance of its business, results of operations, and financial condition or the short- or medium-term performance of Ginkgo Class A Common Stock. Ginkgo’s commitment to pursuing long-term value for the company and its stockholders, potentially at the expense of short- or medium-term performance, may materially adversely affect the trading price of Ginkgo Class A Common Stock, including by making owning Ginkgo Class A Common Stock less appealing to investors who are focused on returns over a shorter time horizon. Ginkgo’s decisions and actions in pursuit of long-term success and long-term stockholder value, which may include its multi-class stock structure, making investments in R&D and its employees, and investing in and introducing new products and services, may not result in the long-term benefits that Ginkgo expects, in which case its business, results of operations and financial condition, as well as the trading price of Ginkgo Class A Common Stock, could be materially adversely affected.

The Ginkgo Bylaws provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers or other employees.

The Ginkgo Bylaws provides unless the combined company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the combined company, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee, agent or stockholder of the combined company to the combined company or any of the combined company’s stockholders, or any claim for aiding and abetting such an alleged breach, (c) any action governed by the “internal affairs doctrine” or arising pursuant to any provision of the Ginkgo Bylaws or the Ginkgo Charter, or to interpret, apply, enforce or determine the validity of the Ginkgo Bylaws or the Ginkgo Charter, or (d) any action asserting a claim against the combined company or any current or former director, officer, employee, agent or stockholder of the combined company (i) arising pursuant to any provision of the DGCL or (ii) as to which the DGCL confers jurisdiction on the Court of Chancery. The exclusive forum provision in the Ginkgo Bylaws will not relieve the combined company of its duties to comply with the federal securities laws and the rules and regulations thereunder, and stockholders of the combined company will not be deemed to have waived the combined company’s compliance with these laws, rules and regulations.

This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with the combined company or its directors, officers or other employees, which may discourage lawsuits against the combined company and its directors, officers and other employees. In addition, stockholders who do bring a claim in the Court of Chancery of the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to the combined company than to its stockholders. However, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable to, or

 

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unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in the Ginkgo Charter to be inapplicable or unenforceable in an action, the combined company might incur additional costs associated with resolving such action in other jurisdictions.

Additional Risks Related to Ginkgo and Zymergen

Ginkgo’s and Zymergen’s businesses are and will be subject to the risks described above. See “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference” beginning on page 317 of this proxy statement/prospectus.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus, and the documents to which Zymergen refer you to in this proxy statement/prospectus, as well as oral statements made or to be made by Zymergen and Ginkgo, may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements may contain words such as “believes”, “anticipates”, “estimates”, “expects”, “intends”, “aims”, “potential”, “will”, “would”, “could”, “considered”, “likely” and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. All statements, other than historical facts, including statements regarding the expected timing of the closing of the Merger and Ginkgo’s or Zymergen’s expected financial condition, results of operations and business performance, including without limitation, any forecasts, financial projections and descriptions of anticipated cost savings or other synergies or expected benefits of the Merger, are forward-looking statements. These statements are based on management’s current expectations, assumptions, estimates and beliefs. While Ginkgo and Zymergen believe these expectations, assumptions, estimates and beliefs are reasonable, such forward-looking statements are only predictions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements:

 

   

failure of Zymergen to obtain stockholder approval as required for the Merger;

 

   

failure to satisfy the conditions to the closing of the Merger;

 

   

unexpected costs, liabilities or delays in connection with or with respect to the Merger;

 

   

the effect of the announcement of the Merger on the ability of Zymergen or Ginkgo to retain and hire key personnel;

 

   

business relationships with customers, suppliers and others with whom Zymergen or Ginkgo does business, or on Zymergen’s or Ginkgo’s operating results, market price of common stock, and business generally;

 

   

potential legal proceedings relating to the Merger and the outcome of any such legal proceeding;

 

   

the inherent risks, costs and uncertainties associated with integrating the businesses successfully and risks of not achieving all or any;

 

   

of the anticipated benefits of the Merger, or the risk that the anticipated benefits of the Merger may not be fully realized or take longer to realize than expected;

 

   

the effect of general economic and market conditions;

 

   

competitive pressures in the markets in which Zymergen and Ginkgo operate;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; and

 

   

other risks to the consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period or at all.

For additional information about risks and uncertainties that may cause actual results of the transaction to differ materially from those described, please refer to Zymergen’s reports filed with the SEC, including without limitation the “Risk Factors” and/or other information included in such reports. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. The forward-looking statements in this proxy statement/prospectus speak only as of the date of this proxy statement/prospectus. Except as required by law, Ginkgo and Zymergen assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

 

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THE COMPANIES

Information about Zymergen

Zymergen partners with nature to design, develop and commercialize microbes, molecules, and materials for diverse end markets. The platform revolves around three key capabilities: the collection of accessible biomolecules, the software and data science technology and the data driven microbe optimization processes. Zymergen has one of the world’s largest collections of accessible biomolecules. This physical and DNA sequence database has within it the potential to create hundreds of thousands of small molecules, millions of natural products and hundreds of millions of proteins.

Zymergen Common Stock is listed on Nasdaq under the symbol “ZY.”

Zymergen’s current contact information is as follows:

Zymergen Inc.

5959 Horton Street, Suite 700

Emeryville, CA 94608

Telephone: (415) 801-8073

Additional information about Zymergen and its subsidiaries is included in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference beginning on page 317 of this proxy statement/prospectus.

Information about Ginkgo

Ginkgo is building a platform to enable customers to program cells as easily as we can program computers. Ginkgo’s platform is enabling biotechnology applications across diverse markets, from food and agriculture to industrial chemicals to pharmaceuticals. Ginkgo has also actively supported a number of COVID-19 response efforts, including K-12 pooled testing, vaccine manufacturing optimization and therapeutics discovery.

Ginkgo Class A Common Stock is listed on the NYSE under the symbol “DNA.”

Ginkgo’s current contact information is as follows:

Ginkgo Bioworks Holdings, Inc.

27 Drydock Avenue, 8th Floor

Boston, MA 02210

Telephone: (877) 422-5362

Additional information about Ginkgo and its subsidiaries can be found under “Information about Ginkgo” beginning on page 166 of this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus for information on how you can view reports and other documents filed with the SEC by Ginkgo. Such filed information does not form a part of this proxy statement/prospectus.

Information about Merger Sub

Merger Sub, a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo, was organized solely for the purpose of entering into the Merger Agreement and completing the Merger and other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in

 

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connection with the transactions contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will cease to exist, with Zymergen surviving the Merger as an indirect wholly owned subsidiary of Ginkgo under the name “Zymergen Inc.”

Merger Sub’s current contact information is as follows:

Pepper Merger Subsidiary Inc.

c/o Ginkgo Bioworks Holdings, Inc.

27 Drydock Avenue, 8th Floor

Boston, MA 02210

Telephone: (877) 422-5362

 

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THE SPECIAL MEETING

This proxy statement/prospectus is being provided to Zymergen stockholders as part of a solicitation of proxies by the Zymergen Board for use at the Special Meeting. This proxy statement/prospectus contains important information regarding the Special Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and voting procedures.

This proxy statement/prospectus is being first mailed on or about September 14, 2022 to all stockholders of record of Zymergen Common Stock as of the Record Date. If you hold your shares of Zymergen Common Stock through a broker, bank or other nominee, this proxy statement/prospectus is being forwarded to you by such broker, bank or other nominee.

 

Date, Time and Place of the Special Meeting

  The Special Meeting will be held at 11:00 a.m. Pacific Daylight Time, on October 17, 2022 via the Internet at www.virtualshareholdermeeting.com/ZY2022SM.

Proposals at the Special Meeting

 

At the Special Meeting, Zymergen stockholders will be asked to vote on the following proposals:

 

Proposal 1—Merger Proposal. To adopt the Merger Agreement.

  Proposal 2—Adjournment Proposal. To approve adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies if sufficient votes to approve the Merger Proposal have not been obtained by Zymergen.

Recommendation of the Zymergen Board

  At a meeting of the Zymergen Board held on July 23, 2022, the Zymergen Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable, fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen; (ii) declared it advisable to enter into the 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 Merger Agreement by Zymergen, the performance by Zymergen of its covenants and other obligations under the Merger Agreement, and the consummation of the transactions contemplated thereby, 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 therein was authorized and approved in accordance with the requirements of the DGCL; and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.
  The Zymergen Board unanimously recommends that you vote “FOR” each of the Merger Proposal and the Adjournment Proposal.

Shares Entitled to Vote

  Stockholders who owned Zymergen Common Stock at the close of business on the Record Date are entitled to receive notice of, attend and vote at the Special Meeting. On the Record Date, there were 104,355,336 shares of Zymergen Common Stock outstanding and entitled to vote at the Special Meeting. As a Zymergen stockholder on the Record Date, you have a right to vote on certain matters affecting Zymergen. The proposals that will be presented at the Special Meeting and upon which you are being asked to vote are summarized above and fully set forth in this proxy statement/prospectus. Each share of Zymergen Common Stock that you owned at the close of business on the Record Date, including (i) shares held directly in your name as the stockholder of record and (ii) shares held for you as the beneficial owner in “street name” through a broker, bank or other nominee, entitles you to one vote on each proposal to be presented at the Special Meeting.

Quorum Requirement

  A quorum of outstanding shares of Zymergen Common Stock is necessary to take action at the Special Meeting. Holders of a majority of the outstanding shares of Zymergen Common

 

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  Stock entitled to vote as of the Record Date must be present, in person, by remote communication, if applicable, or by proxy, at the Special Meeting to constitute a quorum and to conduct business at the Special Meeting. Your shares are counted as present if you attend the Special Meeting in person or by remote communication, if applicable, or properly submit a proxy by telephone, over the Internet or mail. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum. If you hold your shares of Zymergen Common Stock in “street name” and you fail to give voting instructions to your broker, bank or other nominee, your shares will not be considered present for purposes of determining the presence of a quorum to transact business at the Special Meeting.

Votes Required for the Proposals; Effect of Abstentions and Failure to Vote

  Proposal 1—Merger Proposal. Approval requires the affirmative vote of a majority of the outstanding shares of Zymergen Common Stock. Abstentions will have the same effect as a vote against the Merger Proposal. In addition, if you do not submit a valid proxy or attend the Special Meeting to vote your shares of Zymergen Common Stock in person or if you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, it will have the same effect as a vote against the Merger Proposal.
  Proposal 2—Adjournment Proposal. Approval requires the affirmative vote of a majority of the shares of Zymergen Common Stock present at the Special Meeting in person, by remote communication, if applicable, or by proxy. Abstentions will have the same effect as a vote against the Adjournment Proposal. If you do not submit a valid proxy or attend the Special Meeting to vote your shares of Zymergen Common Stock in person or if you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted in determining the outcome of the Adjournment Proposal.

Methods of Voting—Stockholders of Record

  If you are a Zymergen stockholder of record, you may submit a proxy by mail, by telephone or over the Internet to instruct the Voting of your shares of Zymergen Common Stock at the Special Meeting or you may vote your shares of Zymergen Common Stock at the Special Meeting. Proxies submitted by mail, by telephone or over the Internet must be received by 11:59 p.m., Eastern Time, on October 16, 2022 to be counted.
 

•  To vote during the virtual Special Meeting, go to www.virtualshareholdermeeting.com/ZY2022SM to vote your shares. You will need the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

 

•  To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered and return it promptly in the envelope provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you return your signed proxy card to us before the Special Meeting, we will vote your shares as you direct.

 

•  To vote over the telephone before the Special Meeting, dial toll-free 1-800-690-6903 using a phone and follow the recorded instructions. You will be asked to provide the company number and control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

 

•  To vote through the Internet before the Special Meeting, go to http://www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

 

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If you are a Zymergen stockholder of record and you sign and return your proxy card(s) without indicating how to vote on any particular proposal, the shares of Zymergen Common Stock represented by your proxy card(s) will be counted as present

for purposes of determining the presence of a quorum at the Special Meeting and will be voted “FOR” that proposal.

  We encourage you to submit a proxy by telephone, over the Internet or by signing and returning the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting.

Methods of Voting—Beneficial Owners

  If your shares of Zymergen Common Stock are held in an account at a broker, bank or other nominee, then you are the beneficial owner of shares held in “street name” and this proxy statement/prospectus is being sent to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement/prospectus. If you are not a stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares to be able to vote in person at the Special Meeting.

Attending the Special Meeting

  The live audio webcast of the virtual Special Meeting will begin promptly at 11:00 a.m. Pacific Time. Online access to the webcast will open approximately 15 minutes prior to the start of the virtual Special Meeting to allow time for our stockholders to log in and test their devices’ audio systems. We encourage our stockholders to access the virtual Special Meeting in advance of the designated start time. If you encounter any difficulties accessing the webcast, please call the technical support number that will be posted on the virtual Special Meeting login page. To attend the virtual Special Meeting, stockholders will need to log into www.virtualshareholdermeeting.com/ZY2022SM using the 16-digit control number on the proxy card or the instructions that accompanied your proxy materials. Beneficial shareholders who did not receive a 16-digit control number from their broker, bank or other nominee, who wish to attend the meeting should follow the instructions from their broker, bank or other nominee, including any requirement to obtain a legal proxy.

Voting Instructions

 

If you are a stockholder of record of Zymergen Common Stock and return a signed proxy card but do not provide specific voting instructions, your shares will be voted on the proposals as follows:

 

“FOR” the Merger Proposal; and

 

“FOR” the Adjournment Proposal.

Shares Held in “Street Name”

  In general, if your shares of Zymergen Common Stock are held in “street name” and you do not instruct your broker how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters. None of the proposals at the Special Meeting are routine matters.
  Because none of the proposals voted on at the Special Meeting are routine matters, Zymergen does not expect any broker non-votes at the Special Meeting. As a result, if you hold your Zymergen Common Stock in street name, and you fail to give voting instructions to your broker, bank or other nominee, your broker, bank or other nominee may not submit or vote your shares of Zymergen Common Stock for any purpose at the Special Meeting, which will have the same effect as (1) a vote against the Merger Proposal and (2) no effect on the Adjournment Proposal.

Revoking Your Proxy

 

Stockholder of Record: Shares Registered in Your Name

 

If you are a Zymergen stockholder of record, you may revoke your proxy at any time before the final vote at the Special Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

•  You may submit another properly completed proxy card with a later date.

 

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•  You may grant a subsequent proxy by telephone or through the Internet.

 

 

•  You may send a timely written notice that you are revoking your proxy to Zymergen’s Secretary prior to or at the virtual Special Meeting.

 

 

•  You may attend the virtual Special Meeting and vote by following the instructions described above. Simply attending the meeting will not, by itself, revoke your proxy.

  Your most current proxy card or telephone or interest proxy is the one that is counted.
 

Beneficial Owner: Shares Registered in the Name of Broker or Bank

 

If your shares are held by your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee.

Solicitation of Proxies

  Zymergen will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. We have hired MacKenzie Partners, Inc. to assist in the distribution and solicitation of proxies. Solicitations may be made personally or by mail, facsimile, telephone, messenger or via the Internet. In addition to MacKenzie Partners, Inc.’s estimated proxy solicitation fee of $15,000 plus reasonable out-of-pocket expenses for this service, we will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding the proxy materials to Zymergen stockholders. Directors, officers and employees of Zymergen may also solicit proxies in person, by telephone or by other means of communication. Directors, officers and employees of Zymergen will not be paid any additional compensation for soliciting proxies.

Adjournments

  Although it is not currently expected, the Special Meeting may be adjourned for the purpose of soliciting additional proxies if Zymergen has not received sufficient proxies to constitute the presence of a quorum or sufficient votes for approval of the Merger Proposal. The chairperson of the Special Meeting may also adjourn the Special Meeting whether or not a quorum is present, the Special Meeting may be adjourned if sufficient votes are cast in favor of the Adjournment Proposal. Pursuant to the Zymergen Bylaws, notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which adjournment is taken. If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Zymergen stockholder of record entitled to vote at such adjourned meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the Special Meeting. If the Special Meeting is adjourned, Zymergen stockholders who have already sent in their proxies will be allowed to revoke them at any time prior to their use.

Stockholder List

  A list of Zymergen stockholders entitled to vote at the Special Meeting will be available for inspection at Zymergen’s principal executive offices, located at 5959 Horton Street, Suite 700, Emeryville, CA 94608, at least 10 days prior to the date of the Special Meeting for any purpose germane to the Special Meeting, during ordinary business hours. The list will also be available during the Special Meeting for inspection by any Zymergen stockholder through the meeting website at www.virtualshareholdermeeting.com/ZY2022SM.

Appraisal Rights

  Because Zymergen Common Stock is listed on Nasdaq, and the Merger Consideration consists of only shares of Ginkgo Class A Common Stock, which will be listed on the NYSE, and cash in lieu of fractional shares, holders of Zymergen Common Stock will not be entitled to appraisal rights in the Merger with respect to their shares of Zymergen Common Stock under Section 262 of the DGCL.

 

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BENEFICIAL STOCK OWNERSHIP OF GINKGO DIRECTORS, EXECUTIVE OFFICERS

AND CERTAIN HOLDERS OF GINKGO COMMON STOCK

The following table sets forth information known to Ginkgo regarding the beneficial ownership of Ginkgo Class A Common Stock and Ginkgo Class B Common Stock as of August 31, 2022 (unless otherwise specified) by:

 

   

each person who is a named executive officer or director of Ginkgo;

 

   

all executive officers and directors of Ginkgo as a group; and

 

   

each person who is a beneficial owner of more than 5% of Ginkgo Class A Common Stock or Ginkgo Class B Common Stock.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Ginkgo Common Stock (as defined below in the section entitled “Information About Ginkgo—Description of Ginkgo’s Capital Stock” beginning on page 271) issuable upon exercise of options and warrants currently exercisable within 60 days are deemed outstanding solely for purposes of calculating the percentage of total voting power of the beneficial owner thereof. Unless otherwise indicated, Ginkgo believes that all persons named in the table below have sole voting and investment power with respect to the voting securities beneficially owned by them.

The beneficial ownership of Ginkgo Common Stock is based on 1,191,989,401 shares of Ginkgo Class A Common Stock and 395,331,225 shares of Ginkgo Class B Common Stock issued and outstanding as of August 31, 2022.

 

    Class A
Common Stock
    Class B
Common Stock
    % of
Total
Voting
Power**
 
Name of Beneficial Owner   Shares      %     Shares     %     %  

Directors and Executive Officers of Ginkgo

          

Jason Kelly(1)

    —          —         108,213,460       27.4     21.0

Reshma Shetty(2)

    —          —         191,624,084       48.5     37.2

Mark Dmytruk(3)

    —          —         674,494       *       *  

Arie Belldegrun(4)

    589,662        *       —         —         *  

Marijn Dekkers(5)

    7,972,951        *       —         —         *  

Christian Henry(6)

    1,376,864        *       —         —         *  

Reshma Kewalramani(7)

    70,921        *       —         —         *

Shyam Sankar(8)

    1,331,874        *       —         —         *  

Harry E. Sloan(9)

    70,921        *       —         —         *  

Kathy Hopinkah Hannan(10)

    61,986        *       —         —         *  
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

All Directors and Executive Officers of Ginkgo as a Group (10 individuals)

    11,475,179        1.0     300,512,038       75.8     58.6

5% Beneficial Owners of Ginkgo

          

Entities affiliated with Anchorage Capital Group(11)

    69,208,354        5.8     —         —         1.3

Bartholomew Canton(12)

    —          —         191,624,084       48.5     37.2

Austin Che(13)

    —          —         108,703,220       27.5     21.1

Entities affiliated with Baillie Gifford & Co.(14)

    167,752,680        14.1     —         —         3.3

Cascade Investment, L.L.C.(15)

    151,865,481        12.7     —         —         3.0

General Atlantic (GK), L.P.(16)

    111,566,297        9.4     —         —         2.2

Thomas Knight(17)

    66,110,869        5.5     8,972,183       2.3     3.0

Senator Global Opportunity Master Fund LP(18)

    76,595,199        6.4     —         —         1.5

Viking Global Investors LP(19)

    115,084,128        9.7     —         —         2.2

 

*

Less than one percent.

 

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**

Percentage of total voting power represents voting power with respect to all shares of Ginkgo Class A Common Stock and Ginkgo Class B Common Stock, as a single class. Each share of Ginkgo Class B Common Stock is entitled to 10 votes per share and each share of Ginkgo Class A Common Stock is entitled to one vote per share. For more information about the voting rights of Ginkgo Common Stock, see “Information about Ginkgo—Description of Ginkgo’s Capital Stock” beginning on page 271 of this proxy statement/prospectus.

(1)

Consists of (a) 96,485,403 shares of Ginkgo Class B Common Stock held by Dr. Kelly and (b) 11,728,057 shares of Ginkgo Class B Common Stock held by The Kelly 2016 Grantor Retained Annuity Trust, over which Dr. Kelly has sole voting and dispositive power.

(2)

Consists of (a) 28,876,151 shares of Ginkgo Class B Common Stock held by Dr. Shetty, (b) 70,389,783 shares of Ginkgo Class B Common Stock held by The Reshma Padmini Shetty Revocable Living Trust—2014, over which Dr. Shetty has sole voting and dispositive power, (c) 8,245,491 shares of Ginkgo Class B Common Stock held by The Reshma Padmini Shetty 2021 Grantor Retained Annuity Trust, over which Dr. Shetty has sole voting and dispositive power, (d) 2,583,588 shares of Ginkgo Class B Common Stock held by a family trust, and (e) 81,529,071 shares of Ginkgo Class B Common Stock beneficially owned by Dr. Shetty’s spouse, as reported in footnote (5) below. The voting and dispositive power over the shares held by the family trust are held by three or more individuals acting by majority approval and therefore none of the individuals is deemed a beneficial owner of the shares held by such trust.

(3)

Consists of (a) 674,494 shares of Ginkgo Class B Common Stock held by Mr. Dmytruk.

(4)

Consists of (a) 89,662 shares of Ginkgo Class A Common Stock held directly by Dr. Belldegrun and (b) 500,000 shares of Ginkgo Class A Common Stock held by Bellco Legacy LLC. Bellco Legacy LLC is owned and managed by trusts controlled by Dr. Belldegrun.

(5)

Consists of (a) 2,192,587 shares of Ginkgo Class A Common Stock held by Dr. Dekkers and (b) 5,780,364 shares of Ginkgo Class A Common Stock held by Novalis LifeSciences Investments I, L.P. (“Novalis LifeSciences”). Dr. Dekkers, the Manager of the general partner of Novalis LifeSciences, has sole voting and dispositive power over the shares held by Novalis LifeSciences and, as a result, may be deemed to share beneficial ownership of the shares held by Novalis LifeSciences. The address for this stockholder is 1 Liberty Lane, Suite 100, Hampton, NH 03842.

(6)

Consists of 376,864 shares of Ginkgo Class A Common Stock held by Mr. Henry.

(7)

Consists of 70,921 shares of Ginkgo Class A Common Stock held by Dr. Kewalramani.

(8)

Consists of 1,331,874 shares of Ginkgo Class A Common Stock held by Mr. Sankar.

(9)

Consists of 70,921 shares of Ginkgo Class A Common Stock held by Mr. Sloan.

(10)

Consists of 61,986 shares of Ginkgo Class A Common Stock held by Dr. Hannan.

(11)

Consists of (a) 34,454,177 shares of Ginkgo Class A Common Stock held by Anchorage Illiquid Opportunities Master VI (A), L.P. and (b) 34,454,177 shares of Ginkgo Class A Common Stock held by Anchorage Illiquid Opportunities Offshore Master V, L.P. (c) 250,000 shares of Ginkgo Class A Common Stock held for the account of ACMO (d) 50,000 Shares the Reporting Persons have the right to acquire upon exercise of warrants held for the account of ACMO Anchorage Advisors Management, L.L.C. is the sole managing member of Anchorage Capital Group, L.L.C. (“Anchorage”), which in turn is the investment manager of AIOM VI and AIOM V. Mr. Kevin Ulrich is the Chief Executive Officer of Anchorage and the senior managing member of Anchorage Advisors Management, L.L.C. As such, each of the foregoing persons may be deemed to have voting and dispositive power over the shares held by AIOM VI and AIOM V. Each of the foregoing persons disclaims beneficial ownership of the shares held by AIOM VI and AIOM V, except of any pecuniary interests therein. The address for these stockholders is 610 Broadway, 6th Floor, New York, NY 10012. Data was obtained from 13G/A that was filed with the Securities and Exchange Commission on February 14, 2022.

(12)

Consists of (a) 28,876,151 shares of Ginkgo Class B Common Stock held by Dr. Canton, (b) 70,389,783 shares of Ginkgo Class B Common Stock held by The Bartholomew Canton Revocable Living Trust—2014, over which Dr. Canton has sole voting and dispositive power, (c) 8,245,491 shares of Ginkgo Class B Common Stock held by The Bartholomew Canton 2021 Grantor Retained Annuity Trust, over which Dr. Canton has sole voting and dispositive power, (d) 2,583,588 shares of Ginkgo Class B Common Stock held by a family trust, and (e) 81,529,071 shares of Ginkgo Class B Common Stock held by Dr. Canton’s

 

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  spouse as reported in footnote (2) above. The voting and dispositive power over the shares held by the family trust are held by three or more individuals acting by majority approval and therefore none of the individuals is deemed a beneficial owner of the shares held by such trust.
(13)

Consists of (a) 28,876,151 shares of Ginkgo Class B Common Stock held by Dr. Che, (b) 78,927,069 shares of Ginkgo Class B Common Stock held by Austin Che Revocable Trust, over which Dr. Che has sole voting and dispositive power and (c) 900,000 shares of Ginkgo Class B Common Stock held by a family trust.

(14)

Consists of shares of Ginkgo Class A Common Stock. All shares of Ginkgo Class A Common Stock are held by Baillie Gifford & Co. and/or one or more of its investment adviser subsidiaries, which may include Baillie Gifford Overseas Limited, on behalf of investment advisory clients, which may include investment companies registered under the Investment Company Act, employee benefit plans, pension funds or other institutional clients. Securities representing more than 5% of the class are held on behalf of Scottish Mortgage Investment Trust PLC, a close-ended investment trust which is managed by Baillie Gifford & Co. Limited, a wholly owned subsdiary of Baillie Gifford & Co. The address for these stockholders is c/o Baillie Gifford & Co, Calton Square 1 Greenside Row. Edinburgh Scotland, UK EH1 3AN. Data was obtained from 13G/A that was filed with the Securities and Exchange Commission on April 6, 2022.

(15)

Consists of shares of Ginkgo Class A Common Stock. All shares of Ginkgo Class A Common Stock to be held by Cascade Investment, L.L.C. following the Business Combination Closing may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade, L.L.C. The address for this stockholder is 2365 Carillon Point, Kirkland, WA 98033. Data was obtained from 13G/A that was filed with the Securities and Exchange Commission on September 24, 2021.

(16)

Consists of shares of Ginkgo Class A Common Stock. The limited partners that share beneficial ownership of the shares held by General Atlantic (GK), L.P., General Atlantic Partners 100, L.P. (“GAP 100”), General Atlantic Partners (Bermuda) EU, L.P. (“GAP Bermuda EU”), GAP Coinvestments III, LLC (“GAPCO III”), GAP Coinvestments IV, LLC (“GAPCO IV”), GAP Coinvestments V, LLC (“GAPCO V”) and GAP Coinvestments CDA, L.P. (“GAPCO CDA”) are collectively referred to as the “GA Funds”. The address of GA LP, GAP 100, GAPCO III, GAPCO IV, GAPCO V, GAPCO CDA, GA GenPar, GA SPV and GA GK is c/o General Atlantic Service Company, L.P., 55 East 52nd Street, 33rd Floor, New York, NY 10055. The address of GAP Bermuda EU, GenPar Bermuda and GAP Bermuda is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The general partner of GA GK is General Atlantic (SPV) GP, LLC (“GA SPV”). The general partner of GAP 100 is ultimately controlled by General Atlantic, L.P. (“GA LP”), which is controlled by the Management Committee of GASC MGP, LLC (the “Management Committee”). The general partner of GAP Bermuda EU is ultimately controlled by GAP (Bermuda) L.P. (“GAP Bermuda”), which is also controlled by the Management Committee. GA LP is the managing member of GAPCO III, GAPCO IV and GAPCO V, the general partner of GAPCO CDA and is the sole member of GA SPV. There are nine members of the Management Committee. GA GK, GA LP, GASC MGP, LLC, GAP Bermuda, GA SPV and the GA Funds. The GA Funds share beneficial ownership of the shares of Ginkgo Class A Common Stock held by GA GK. The general partner of GA GK is GA SPV. The general partner of GAP 100 is GA GenPar. The general partner of GAP Bermuda EU is GenPar Bermuda. GA LP, which is controlled by the Management Committee of GASC MGP, LLC (the “GA Management Committee”), is the managing member of GAPCO III, GAPCO IV and GAPCO V, the general partner of GAPCO CDA and GA GenPar, and the sole member of GA SPV. The general partner of GenPar Bermuda is GAP Bermuda, which is also controlled by the GA Management Committee. There are nine members of the GA Management Committee. By virtue of the foregoing, the Reporting Persons may be deemed to share voting power and the power to direct the disposition of the shares that each owns of record. Each of the members of the GA Management Committee disclaims ownership of the shares of Ginkgo Class A Common Stock reported herein except to the extent he or she has a pecuniary interest therein. Data was obtained from 13G/A that was filed with the Securities and Exchange Commission on February 11, 2022.

(17)

Consists of (a) 9,182,067 shares of Ginkgo Class A Common Stock held of record by the Reporting Person; (b) 8,972,183 shares of Ginkgo Class B Common Stock, $0.0001 per share, of Ginkgo (the “Class B Common Stock”) held of record by the Reporting Person; (c) 6,995,255 shares of Ginkgo Class A Common Stock held of record by the Knight Family Trust dated August 20, 2019; (d) 47,423,785 shares of Ginkgo Class A Common Stock held of record by the Thomas F. Knight, Jr., Trustee of The Thomas F. Knight Jr.

 

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  Grantor Retained Annuity Trust or his/her successor in trust; and (e) 2,509,762 shares of Ginkgo Class A Common Stock held of record by the Thomas F. Knight Jr. Grantor Retained Annuity Trust (2) dated December 16, 2020. The Reporting Person serves as co-trustee for the Thomas F. Knight, Jr., Trustee of The Thomas F. Knight Jr. Grantor Retained Annuity Trust or his/her successor in trust and the Thomas F. Knight Jr. Grantor Retained Annuity Trust (2) dated December 16, 2020, and the Reporting Person’s spouse serves as co-trustee for the Knight Family Trust dated August 20, 2019. As such, the Reporting Person may be deemed to share beneficial ownership over the shares held of record by each of the trusts. The shares of Ginkgo Class B Common Stock may be redeemed by the holder at any time for shares of Ginkgo Class A Common Stock on a one-to-one basis.
(18)

Consists of shares of Ginkgo Class A Common Stock. The address for this stockholder is 510 Madison Avenue, 28th Floor, New York, NY 10022. Senator Investment Group LP (“Senator”), is investment manager of the stockholder, Senator Global Opportunity Master Fund LP, and may be deemed to have voting and dispositive power with respect to the shares. The general partner of Senator is Senator Management LLC (the “Senator GP”). Douglas Silverman controls Senator GP, and, accordingly, may be deemed to have voting and dispositive power with respect to the shares held by this stockholder. Mr. Silverman disclaims beneficial ownership of the shares held by the stockholder. Data was obtained from 13G/A that was filed with the Securities and Exchange Commission on February 10, 2022.

(19)

Consists of (a) 115,084,128 shares of Ginkgo Class A Common Stock held by Viking Global Investors LP (“VGI”), Viking Global Opportunities Parent GP LLC (“Opportunities Parent”), Viking Global Opportunities GP LLC (“Opportunities GP”), Viking Global Opportunities Portfolio GP LLC (“Opportunities Portfolio GP”), Viking Global Opportunities Illiquid Investments Sub-Master LP (“VGOP”), O. Andreas Halvorsen, David C. Ott and Rose S. Shabet (collectively, the “Reporting Persons”).(b) 27,084,128 shares of Ginkgo Class A Common Stock directly and beneficially owned by VGOP that remain subject to forfeiture to the extent certain price targets are not satisfied and (c) 88,000,000 shares of Ginkgo Class A Common Stock that will be issued to VGOP in exchange for an equivalent quantity of Ginkgo Class C Common Stock. The address for these stockholders is 55 Railroad Avenue, Greenwich, Connecticut 06830. Data was obtained from 13G that was filed with the Securities and Exchange Commission on July 1, 2022.

 

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BENEFICIAL STOCK OWNERSHIP OF ZYMERGEN DIRECTORS, EXECUTIVE OFFICERS

AND CERTAIN HOLDERS OF ZYMERGEN COMMON STOCK

The following table sets forth information regarding the beneficial ownership of Zymergen common stock by:

 

   

each person or group of affiliated persons known by Zymergen to be the beneficial owner of more than 5% of Zymergen capital stock;

 

   

each of Zymergen’s named executive officers;

 

   

each of Zymergen’s directors; and

 

   

all of Zymergen’s directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise noted, Zymergen’s calculation of the percentage of beneficial ownership is based on shares owned and shares of Zymergen common stock outstanding at August 31, 2022. Common stock issuable upon exercise or conversion of options, warrants or other rights to acquire common stock that are currently exercisable or convertible, or exercisable or convertible within 60 days of August 31, 2022 are deemed to be outstanding and beneficially owned by the holder for the purpose of computing share and percentage ownership of that holder, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to the table below, and subject to community property laws where applicable, Zymergen believes the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them.

Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Zymergen Inc., 5959 Horton Street, Suite 700, Emeryville, CA 94608.

 

     Shares
Beneficially Owned
 

Name and Address of Beneficial Owner

   Number      Percent  

Named Executive Officers and Directors

     

Enakshi Singh(1)

     392,500        *  

Steven Chu(2)

     165,666        *  

Jay Flatley(3)

     1,050,574      1.0

Christine M. Gorjanc(4)

     13,527      *  

Travis Murdoch(5)

     29,697        *  

Matthew A. Ocko(6)

     7,366,635      7.1

Sandra E. Peterson(7)

     163,566        *  

Zach Serber(8)

     2,655,695        2.5

Rohit Sharma(9)

     —         

Josh Hoffman(10)

     2,639,170        2.5

Jed Dean(11)

     1,000      *

Current Executive Officers and Directors as a group (10 persons)

     12,206,568        11.5

Other 5% Stockholders

     

Entities affiliated with Data Collective II, L.P.(12)

     7,366,635      7.1

Entities affiliated with SVF Excalibur (Cayman) Limited(13)

     26,614,219      25.5

Entities affiliated with True Ventures IV, L.P.(14)

     7,278,206      7.0

 

*

Represents beneficial ownership of less than one percent (1%).

(1)

Consists of (i) 165,365 shares of common stock held of record by Ms. Singh individually, (ii) 216,718 shares of common stock subject to options exercisable within 60 days of August 31, 2022 and (iii) 10,417 RSUs vesting within 60 days of August 31, 2022.

 

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(2)

Consists of 165,666 shares of common stock subject to options exercisable within 60 days of August 31, 2022.

(3)

Consists of (i) 144,789 shares of common stock held of record by Mr. Flatley individually and (ii) 905,785 shares of common stock subject to options exercisable within 60 days of August 31, 2022.

(4)

Consists of 13,527 shares of common stock subject to options exercisable within 60 days of August 31, 2022.

(5)

Consists of 29,697 of common stock held of record by Dr. Murdoch individually.

(6)

Including shares of common stock held by entities affiliated with Data Collective II, L.P. identified in footnote (11) below. Mr. Ocko is a co-Managing Partner and co-founder of DCVC, and shares voting or dispositive power over the shares held by Data Collective II, L.P. and such entities affiliated with Data Collective II, L.P. identified in footnote (11) below.

(7)

Consists of (i) 69,119 shares of common stock held of record by Ms. Peterson, individually and (ii) 94,447 shares of common stock subject to options exercisable within 60 days of August 31, 2022.

(8)

Consists of (i) 2,461,620 shares of common stock held of record by Dr. Serber, individually and in trusts in the name of his children as follows: (a) 2,358,610 to Dr. Serber individually and (b) 40,000 shares to Kathleen P. Murray as custodian for Ithaka Serber under the California Uniform Transfer to Minors Act and (c) 40,000 shares to Rorik Serber 2021 Irrevocable Trust dated 2/27/2021 and (ii) 185,409 shares of common stock subject to options exercisable within 60 days of August 31, 2022, and (iii) 8,666 RSUs vesting within 60 days of August 31, 2022.

(9)

Excludes shares of common stock held by entities affiliated with True Ventures IV, L.P. identified in footnote (14) below. Dr. Sharma is a partner at True Ventures, but does not have voting or dispositive power over the shares held by entities affiliated with True Ventures IV, L.P.

(10)

Consists of 2,639,170 shares of common stock held of record by Mr. Hoffman, individually and in trusts in the names of his children as follows: (i) 2,559,170 shares to Josh Hoffman, (ii) 40,000 shares to Kathryn Morris as custodian for Alice Hoffman under the California Uniform Transfer to Minors Act and (iii) 40,000 shares to Kathryn Morris as custodian for Isaac Hoffman under the California Uniform Transfer to Minors Act.

(11)

Consists of (i) 500 shares held in the Bonnie K. Dean Revocable Trust and (ii) 500 shares held in the Rudolph N. Dean Revocable Trust.

(12)

As reported in a Schedule 13G filed with the SEC on February 14, 2022, as of December 31, 2021, entities affiliated with Data Collective II, L.P., or DCVC II, whose shares are aggregated for the purposes of reporting ownership information include DCVC Opportunity Fund, L.P., or DCVC OF, Includes: (i) 2,448,901 shares of common stock held by DCVC II and 4,917,734 shares of common stock held by DCVC OF. Data Collective II GP, LLC, or DCVC II GP, is the general partner of DCVC II, and DCVC OF GP, LLC, or DCVC Opportunity Fund GP, is the general partner of DCVC Opportunity Fund. Zachary Bogue and Matthew Ocko are the managing members of each of DCVC II GP and DCVC Opportunity Fund GP. Zachary Bogue and Matthew Ocko are the managing members of DCVC II GP and share voting and dispositive power with respect to the shares held by DCVC II and DCVC Opportunity Fund. The address of the entities listed herein is 270 University Avenue, Palo Alto, California 94301.

(13)

As reported in a Schedule 13G filed with the SEC on February 14, 2022, as of December 31, 2021, entities affiliated with SVF Excalibur (Cayman) Limited whose shares are aggregated for the purposes of reporting ownership information includes SVF Endurance (Cayman) Limited and SoftBank Vision Fund (AIV M1) L.P. Includes 26,614,219 shares of common stock held by SVF Excalibur (Cayman) Limited. SB Investment Advisers (UK) Limited, or SBIA UK, has been appointed as alternative investment fund manager, or AIFM, and is exclusively responsible for managing SoftBank Vision Fund in accordance with the Alternative Investment Fund Managers Directive and is authorized and regulated by the UK Financial Conduct Authority accordingly. As AIFM of SoftBank Vision Fund, SBIA UK is exclusively responsible for making all final decisions related to the acquisition, structuring, financing, voting and disposal of SoftBank Vision Fund’s investments, including as held by SVF Excalibur (Cayman) Limited. The address for SBIA UK is 69 Grosvenor Street, London W1K 3JP, United Kingdom. The address for AIV M1 is 251 Little Falls Drive, Wilmington, Delaware 19808. The address for each of SVF Excalibur (Cayman) Limited and SVF Endurance (Cayman) Limited is c/o Walkers, Cayman Corporate Centre, 190 Elgin Avenue, George Town, Grand Cayman KY1-9008, Cayman Islands.

 

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(14)

As reported in a Schedule 13G filed with the SEC on February 11, 2022, as of December 31, 2021, entities affiliated with True Ventures IV, L.P. whose shares are aggregated for the purposes of reporting ownership information include True Ventures Select I, L.P., True Ventures Select II, L.P., True Ventures Select III, L.P., True Ventures Select IV, L.P and True Ventures IV-A, L.P. Includes (i) 2,659,857 shares of common stock held by True Ventures IV, L.P (“TV IV”; (ii) 364,929 shares of common stock held by True Ventures IV-A, L.P. (“TV-IV A”); (iii) 930,790 shares of common stock held by True Ventures Select I, L.P. (“TVS I”); (iv) 706,563 shares of common stock held by True Ventures Select II, L.P. (“TVS II”); (v) 1,463,333 shares of common stock held by True Ventures Select III, L.P. (“TVS III”); and (vi) 1,152,734 shares of common stock held by True Ventures Select IV, L.P. (“TVS IV”). Each of the foregoing entities has sole voting and dispositive power over the shares owned by such entity except that: (a) True Venture Partners IV, L.L.C. (“TVP IV”), the general partner of TV IV and TV-IV A, may be deemed to have sole power to vote and dispose of shares held by TV IV and TV-IV A, and Philip D. Black (“Black”) and Jon Callaghan (“Callaghan”), the managing members of TVP IV, may be deemed to have shared power to vote and dispose of these shares; (b) True Venture Partners Select I, L.L.C. (“TVPS I”), the general partner of TVS I, may be deemed to have sole power to vote and dispose of shares held by TVS I, and Black and Callaghan, the managing members of TVPS I, may be deemed to have shared power to vote and dispose of these shares; (c) True Venture Partners Select II, L.L.C. (“TVPS II”), the general partner of TVS II, may be deemed to have sole power to vote and dispose of shares held by TVS II, and Black and Callaghan, the managing members of TVPS II, may be deemed to have shared power to vote and dispose of these shares; (d) True Venture Partners Select III, L.L.C. (“TVPS III”), the general partner of TVS III, may be deemed to have sole power to vote and dispose of shares held by TVS III, and Black and Callaghan, the managing members of TVPS III, may be deemed to have shared power to vote and dispose of these shares; and (e) True Venture Partners Select IV, L.L.C. (“TVPS IV”), the general partner of TVS IV, may be deemed to have sole power to vote and dispose of shares held by TVS IV, and Black and Callaghan, the managing members of TVPS IV, may be deemed to have shared power to vote these shares. The address of the entities listed herein is 575 High Street, Suite 400, Palo Alto, CA 94301.)

 

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PROPOSAL 1—ADOPTION OF THE MERGER AGREEMENT

Zymergen stockholders are asked to adopt the Merger Agreement. Zymergen stockholders should carefully read this entire proxy statement/prospectus and the documents incorporated herein by reference, including the full text of the Merger Agreement, which is attached as Annex A, for a more complete understanding of the Merger. For a detailed discussion of the terms of the Merger Agreement and the Merger, see the information about the Merger and the Merger Agreement throughout this proxy statement/prospectus, including the information under “The Merger Agreement” beginning on page 140 of this proxy statement/prospectus. In addition, important business and financial information about (i) Ginkgo is included under “Information About Ginkgo” beginning on page 166 of this proxy statement/prospectus and “Index to Financial Statements of Ginkgo” beginning on page F-1 of this proxy statement/prospectus and (ii) Zymergen is incorporated into this proxy statement/prospectus by reference. See also “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference” beginning on page 317 of this proxy statement/prospectus.

Approval of the Merger Proposal is a condition to completion of the Merger. If the Merger Proposal is not approved, the Merger will not occur. For a detailed discussion of the conditions of the Merger, see “The Merger Agreement—Conditions to the Merger” beginning on page 142 of this proxy statement/prospectus.

Approval of the Merger Proposal requires the affirmative vote of a majority of the outstanding shares of Zymergen Common Stock. Abstentions and broker non-votes will have the same effect as a vote against the Merger Proposal. Shares of Zymergen Common Stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a stockholder of record of Zymergen Common Stock returns a signed proxy card without indicating voting preferences on such proxy card, the shares of Zymergen Common Stock represented by that proxy card will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Zymergen Board.

At a meeting of the Zymergen Board held on July 23, 2022, the Zymergen Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable, fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen; (ii) declared it advisable to enter into the 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 Merger Agreement by Zymergen, the performance by Zymergen of its covenants and other obligations under the Merger Agreement, and the consummation of the transactions contemplated thereby, 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 therein was authorized and approved in accordance with the requirements of the DGCL; and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.

BOARD RECOMMENDATION

The Zymergen Board unanimously recommends that Zymergen stockholders vote “FOR” the Merger Proposal.

 

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PROPOSAL 2—ADJOURNMENTS OF THE SPECIAL MEETING

This proposal would permit the Zymergen Board to adjourn from time to time the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the Merger Proposal.

Pursuant to the Zymergen Bylaws, notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which adjournment is taken. If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the Special Meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of Zymergen Common Stock present at the Special Meeting in person, by remote communication, if applicable, or by proxy. Abstentions will have the same effect as a vote against the Adjournment Proposal. If you do not submit a valid proxy or attend the Special Meeting to vote your shares of Zymergen Common Stock in person or if you hold your shares of Zymergen Common Stock in “street name” and fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted in determining the outcome of the Adjournment Proposal. Shares of Zymergen Common Stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a stockholder of record of Zymergen Common Stock returns a signed proxy card without indicating voting preferences on such proxy card, the shares of Zymergen Common Stock represented by that proxy card will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Zymergen Board.

BOARD RECOMMENDATION

The Zymergen Board unanimously recommends that Zymergen stockholders vote “FOR” the Adjournment Proposal.

 

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THE MERGER

This section of the proxy statement/prospectus describes certain material aspects of the proposed Merger. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus and the documents incorporated herein by reference, including the full text of the Merger Agreement, which is attached as Annex A, for a more complete understanding of the Merger. In addition, important business and financial information about (i) Ginkgo is included under “Information About Ginkgo” beginning on page 166 of this proxy statement/prospectus and “Index to Financial Statements of Ginkgo” beginning on page F-1 of this proxy statement/prospectus and (ii) Zymergen is incorporated into this proxy statement/prospectus by reference and is included in the Annexes hereto. See also “Where You Can Find More Information” beginning on page 316 of this proxy statement/prospectus and “Incorporation of Certain Information by Reference beginning on page 317 of this proxy statement/prospectus.

Background of the Merger

The Zymergen Board, together with Zymergen’s senior management and with the assistance of Zymergen’s advisors, has periodically reviewed and considered various strategic and other opportunities available to Zymergen, potential operational changes and other ways to enhance and balance value for its stockholders, the interests of those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen. As part of this periodic review, from time to time, during the two years prior to the contacts and process that resulted in Zymergen’s entry into the Merger Agreement described below, the Zymergen Board and management team considered potential strategic alternatives, including strategic acquisitions and divestitures. None of the discussions during that time period progressed beyond preliminary phases other than in connection with the previously disclosed acquisitions of enEvolv, Inc. and Lodo Therapeutics Corporation, and as described below.

In the months following Zymergen’s initial public offering, Zymergen management identified certain material and adverse developments in Zymergen’s business that it believed would pose significant challenges to Zymergen’s ability to execute on its then-current strategic plan.

In response to these significant challenges, the non-management members of the Zymergen Board engaged in regular discussions, including in meetings held on June 19, June 22, June 30, July 8, July 14, July 21 and July 28, 2021, to better understand the change in expectations by Zymergen management and reasons therefor. From time to time at such meetings, Zymergen management and advisors from Freshfields and Boston Consulting Group (“BCG”) were requested to participate and assist the Zymergen Board in its review. As part of Zymergen management’s development of an updated strategic plan over the coming months, BCG was asked to review and provide a market assessment of Zymergen’s business programs, provide input on which programs to prioritize, and work with management to simplify the organization and reduce Zymergen’s cash burn. The Zymergen Board also considered certain organizational changes that it believed were necessary to implement in light of the significant challenges that Zymergen faced. After extensive discussions, the Zymergen Board unanimously appointed Mr. Flatley as acting Chief Executive Officer to replace Josh Hoffman, Zymergen’s Chief Executive Officer at the time, and authorized the formation of a strategic oversight committee (the “Committee”) to assist with, among other things, overseeing the formulation of a new strategic plan for Zymergen. Based on their respective skills and experience, the Zymergen Board appointed Jay Flatley, Sandra Peterson, Steven Chu and Travis Murdoch to serve on the Committee. Each of Ms. Peterson and Messrs. Chu and Murdoch are non-management members of the Zymergen Board.

On August 3, 2021, Zymergen announced, among other things, (1) its preliminary financial results for the second quarter of 2021, noting that Zymergen no longer expected product revenue in 2021 and expected product revenue in 2022 to be immaterial, (2) the replacement of Mr. Hoffman as Chief Executive Officer with Mr. Flatley as acting Chief Executive Officer, (3) the appointment of Ms. Peterson as lead independent director and (4) the formation of the Committee to oversee the formulation of a new strategic plan for the company. Zymergen Common Stock traded lower by more than 76.0% the following day and closed at $8.25 per share.

 

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In August 2021, Christian Henry, a member of the Ginkgo Board, called Mr. Flatley to discuss Zymergen’s strategic direction, and to suggest that Mr. Flatley meet with Jason Kelly, the co-founder, Chief Executive Officer and a director of Ginkgo.

On August 27, 2021, Mr. Flatley met with Dr. Kelly and discussed, among other things, a possible strategic transaction between the companies. Mr. Flatley informed Dr. Kelly that Zymergen was not in a position to consider a transaction with Ginkgo at the time. From time to time over the following months until the signing of the Merger Agreement, including in meetings on January 27, 2022 and February 10, 2022, Mr. Flatley engaged in further discussions with Dr. Kelly about a potential transaction with Ginkgo. Mr. Flatley kept the Zymergen Board apprised of these discussions and discussed with members of the Zymergen Board the potential opportunity for a transaction with Ginkgo.

In September and October of 2021, Zymergen executed a reduction in its workforce that resulted in the termination of 220 employees in accordance with Zymergen’s plan to reduce costs to align with its delayed revenue ramp.

On October 27 and November 10, 2021, the Committee, with the participation from other members of the Board, met to oversee and consult on, among other things, the progress of Zymergen’s various business initiatives and Zymergen management’s development of an updated strategic plan to refocus Zymergen on the most important initiatives, resize Zymergen’s workforce and re-forecast Zymergen’s cash burn.

On November 3, 2021, Zymergen reported its preliminary financial results for the third quarter of 2021, reporting total revenue of $4.1 million compared to a street consensus of $3.41 million and loss per share of ($0.96) compared to a street consensus of ($0.65). Also that day, Zymergen announced that its consumer care programs and most of its electronics film programs would be discontinued. These changes, together with the elimination of approximately 220 positions across a variety of levels and functions in September and October of 2021, were designed to slow Zymergen’s cash burn sufficiently to operate until mid-2023 utilizing its cash on hand. Zymergen Common Stock traded lower by more than 8.0% the following day and closed at $10.50 per share.

On December 15, 2021, the Zymergen Board held a meeting with Zymergen management and an advisor from Freshfields participating. At the meeting, Zymergen management presented a draft strategic plan that was previously provided for the Zymergen Board’s review that included various strategic initiatives related to the current state of Zymergen’s business and operations, and the path to achieving Zymergen’s high-level goals from 2022 to 2024. Following discussion, members of the Zymergen Board provided feedback to be incorporated into the strategic plan. Among other things, the Zymergen Board discussed a potential carve-out transaction involving the financing and separation or sale of Zymergen’s automation business, the strategic and commercial alternatives to derive value from the automation business and the potential benefits of doing so for the remainder of Zymergen’s businesses under various scenarios. Various reasons were articulated for separating or selling the automation business from Zymergen, including (1) a clear market need for fully integrated laboratory automation solutions, (2) the automation business being a non-core business of Zymergen, allowing for an easier separation, (3) eliminating Zymergen’s need to fund automation business development, (4) mitigating potential execution risk and (5) generating cash proceeds for Zymergen. Although different strategies and their implications were discussed, a final decision was not made on the strategy with respect to the automation business and the Zymergen Board decided to further consider strategic alternatives for the automation business.

On December 17, 2021, after additional discussions between the members of the Zymergen Board, Ms. Peterson and Mr. Flatley held a call and concluded that Zymergen should consider retaining a financial advisor to evaluate a broad range of potential strategic alternatives that might be available to Zymergen, with the objective of enhancing and balancing value for stockholders, the best interests of those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen. Based on, among other things, Cowen’s familiarity and prior experience advising Zymergen, the Zymergen Board instructed Mr. Flatley to invite Cowen to make a presentation to members of the Zymergen Board.

 

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On January 20, 2022, representatives from Cowen gave a presentation to members of the Zymergen Board, which included Cowen’s credentials to undertake the proposed assignment, an overview of investors’ views of Zymergen’s business and a preliminary review of various strategic alternatives available to Zymergen. Based on, among other things, its reputation, experience and familiarity advising and assisting Zymergen on various matters prior to, in connection with, and following Zymergen’s initial public offering in 2021, and subject to negotiating an acceptable engagement letter, the Zymergen Board authorized the engagement of Cowen as Zymergen’s financial advisor to assist the Zymergen Board with its review of Zymergen’s strategic alternatives. The Zymergen Board then discussed the progress to complete an updated 2022 budget, three-year plan, and financial projections for Zymergen for 2022 through 2031 (the “Zymergen Projections”) for discussion at an upcoming board meeting. The Zymergen Board also instructed the representatives of Cowen to prepare preliminary financial analyses of Zymergen and its three businesses (automation, advanced materials and drug discovery) to assist the Zymergen Board in its evaluation of strategic alternatives. Additional information pertaining to the Zymergen Projections is set forth in the section of this proxy statement/prospectus captioned “—Certain Financial Information of Zymergen”. The Zymergen Board met again on February 1, 2022 to continue its discussion of potential strategic alternatives available to Zymergen.

On February 15, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, Zymergen management presented to the Zymergen Board an updated strategic plan, which was previously provided for the Zymergen Board’s review. Zymergen management also discussed with the Zymergen Board Zymergen’s 2022 budget and three-year plan, which were previously provided for the Zymergen Board’s review, noting certain updates that had been made based on revisions to the preliminary financial projections and assumptions. After discussion, the Zymergen Board approved Zymergen’s 2022 budget and strategic plan. Mr. Flatley discussed with the Zymergen Board the recent interactions with Ginkgo, which expressed an interest in acquiring certain assets of Zymergen, including the automation business. At the meeting, advisors from Freshfields reviewed for the Zymergen Board, among other things, its fiduciary duties under Delaware law as directors of a Delaware public benefit corporation in the context of a possible sale of Zymergen or other strategic alternative transaction.

On February 20, 2022, Mr. Flatley and Dr. Kelly met, and at that meeting, Dr. Kelly discussed Ginkgo’s potential interest in exploring a carve-out transaction. Mr. Flatley indicated that a sale of the whole company was favored by the Zymergen Board over a carve-out transaction involving Zymergen’s automation business.

The Zymergen Board, together with representatives of Cowen, then discussed various strategic alternatives that were available to Zymergen with respect to the automation business, including, among other things, a potential private financing and spin-out transaction involving the automation business that would result in Zymergen retaining equity in the automation business, a potential combination in a merger-of-equals transaction involving the automation business and a potential sale of the automation business Representatives of Cowen also presented in detail Cowen’s preliminary financial analyses of the automation business based on preliminary projections for the business provided by Zymergen management. After discussion, the Zymergen Board unanimously determined to explore these various strategic alternatives for the financing and separation or sale of the automation business. The Zymergen Board further discussed, among other things, the preparation of next steps in the strategic review process and concluded that it would be advisable for Zymergen, with the assistance of Cowen, to commence the preparation of process materials for the financing and separation or sale of the automation business, finalize financial projections for the automation business, organize a virtual data room for interested parties to perform due diligence review of the automation business, and to finalize a list of potential interested parties for possible outreach in the near future. Given Ginkgo’s continued interest in pursuing a strategic transaction with Zymergen, the Zymergen Board also instructed Zymergen management, with the assistance of Cowen, to continue discussions with Ginkgo regarding its interest for further discussion at the meeting of the Zymergen Board scheduled for later that month.

On February 25, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, representatives of Cowen reviewed

 

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Cowen’s analyses of various strategic alternatives that were available to Zymergen. The Zymergen Board, with the assistance of Cowen and Zymergen management, considered the potential benefits, risks and considerations of the following three strategic alternatives: (1) a sale of Zymergen, (2) a carve-out transaction involving the financing and separation or sale of the automation business (including potentially in combination with the separation of other Zymergen businesses) and (3) continuing to operate on a stand-alone basis under its current strategic plan, which contemplated a financing raise such as through a private investment in public equity (“PIPE”) transaction or an at-the-market equity offering (an “ATM Offering”). In the case of a sale of Zymergen, the Zymergen Board, together with representatives of Cowen and members of Zymergen management, reviewed, among other things, a list of parties who would be potentially interested in acquiring Zymergen, and noted that, as a result of Zymergen’s significant cash burn and lack of a path to profitability, these attributes would likely significantly narrow the universe of potential qualified parties that would be interested in acquiring Zymergen to a limited set of strategic bidders only. In the case of a carve-out transaction, it was noted that, among other things, such a scenario had the potential for increased valuations on specific businesses. However, participants at the meeting also discussed, among other things, the risks, timeline impact, drawbacks and complexities from transaction structures for less than all three of Zymergen’s businesses, including, among other things, (1) transaction structure complications of coordinating with multiple parties, (2) the potential for a protracted transaction timeline, including the market risks associated with such prolonged timeline, (3) tax liabilities (or loss of tax benefits) under such structures and the need to scale back or wind down the residual corporate infrastructure as part of such transactions, (4) issues with employee retention and the potential employee severance payments and obligations that may result, particularly if the counterparty in such transaction structure is a strategic party, (5) the possible need to put in place shared services or license arrangements between Zymergen and a party, or among multiple parties under such structures, (6) the likelihood that Zymergen’s outstanding stockholder litigation and capital expenditures and commitments related to its leased real property would discourage such a structure, as buyers would likely not be willing to assume such liabilities and (7) the additional headwinds that the residual company following a carve-out transaction would face as a small market cap company as a result of its decreased size, scale and loss of growth opportunities. In the case of Zymergen continuing to operate on a standalone basis, it was noted that Zymergen’s significant execution risks identified in the second quarter of 2021 remained a persistent issue for Zymergen that would, among other things, require Zymergen to reduce its cash burn imminently by undergoing additional significant restructurings and employee layoffs and raising additional capital (including through a PIPE or ATM Offering) by mid-2023 in order to continue as a going concern.

After discussion of the benefits, risks and considerations of pursuing these strategic alternatives, the Zymergen Board concluded that the sale of Zymergen to a single party would be the strategic alternative most likely to enhance and balance value for Zymergen’s stockholders, the interests of those materially affected by Zymergen’s conduct, and its public benefit purpose, including as compared to Zymergen remaining a standalone company, and the Zymergen Board approved Zymergen’s exploration of such strategic alternative. Although this strategic option was approved by the Zymergen Board as the primary focus of Zymergen management and Cowen, given the various risks, considerations and uncertainties with pursuing a sale of Zymergen, the Zymergen Board also concluded that it would be prudent to explore all three strategic alternatives in parallel and also approved Zymergen’s exploration of such alternatives in parallel.

After discussion, the Zymergen Board unanimously authorized Zymergen’s management to finalize the Zymergen Projections, prepare a management presentation and populate a virtual dataroom for potentially interested parties in a sale of Zymergen or one of its businesses and potentially interested investors in a PIPE transaction or ATM Offering (as part of Zymergen’s standalone alternative). The Zymergen Board then discussed whether to provide due diligence access to Ginkgo with respect to its outreach on a carve-out transaction at this time. After a discussion on the benefits and drawbacks of providing earlier due diligence access to Ginkgo than other parties in the strategic review process, the Zymergen Board determined to grant access to Ginkgo, subject to its entry into a customary confidentiality agreement with Zymergen and instructed representatives of Cowen and members of Zymergen management to convey to Ginkgo and other potentially interested parties in the process that it was the Zymergen Board’s strong preference to explore a sale of Zymergen over any other

 

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strategic alternative transaction. Also at the meeting, advisors from Freshfields again reviewed with the Zymergen Board its fiduciary duties under Delaware law as directors of a Delaware public benefit corporation in the context of a possible sale of Zymergen or other strategic alternative transaction.

Between February 25 and May 19, 2022, at the direction of, and in regular communication with, the Zymergen Board, including at Zymergen Board meetings held on February 25, March 24, April 15, May 4, May 18 and May 19, 2022, Zymergen management and representatives of Cowen took the following actions:

 

   

Carve-out transaction involving the financing and separation of the automation business. They contacted 59 potentially interested financial parties. 22 parties received teaser materials that did not identify Zymergen or otherwise include confidential information, eight of which executed customary confidentiality agreements and participated in meetings with Zymergen management, three of which proceeded with engaging in a due diligence review in connection with a carve-out transaction, and one of which expressed interest to serve as a lead investor with $15 million in a potential spin-off of the automation business and submitted a term sheet to Zymergen on May 22, 2022. Prior to signing the Merger Agreement, no party submitted a proposal in respect of a carve-out transaction, with parties that declined to pursue such transaction citing, among other reasons, that the automation business did not fit the financial party’s investment portfolio.

 

   

Continuing to operate on a stand-alone basis under its current strategic plan and obtaining financing through an ATM Offering. They took steps to prepare, and Zymergen filed, a $200 million universal shelf registration statement with the SEC on May 12, 2022, which would allow Zymergen to pursue an ATM Offering or other public equity or debt offerings, subject to market conditions, and such registration statement was declared effective on June 7, 2022.

 

   

Continuing to operate on a stand-alone basis under its current strategic plan and obtaining financing through a PIPE. They commenced outreach with respect to a PIPE to ten potentially interested financial parties, with all such parties declining to participate, citing, among other reasons, Zymergen’s cash burn.

On March 16, 2022, Zymergen entered into a confidentiality agreement with Ginkgo and provided access to diligence materials. Also that day, representatives of Ginkgo requested additional materials from Zymergen to enable Ginkgo to assess the benefits and drawbacks of pursuing an acquisition of Zymergen or a carve-out transaction and Zymergen began to provide due diligence materials to Ginkgo on March 22, 2022.

On March 22, 2022, Zymergen announced its preliminary financial results for the fourth quarter and full year of 2021, reporting for the fourth quarter of 2021 total revenue of $3.0 million compared to a street consensus of $3.34 million and loss per share of ($0.76) compared to a street consensus of ($0.85). Zymergen Common Stock traded lower by 5.6% the following day and closed at $3.40 per share.

Between April 11 and June 4, 2022, at the direction of, and in regular communication with, the Zymergen Board, including at Zymergen Board meetings held on April 15, May 4, May 18, May 19, May 27, June 2 and June 3, 2022, Cowen contacted 41 potentially interested strategic parties. Eight such parties (including Ginkgo, which previously had executed a confidentiality agreement, and, as described below, Party A, Party B, Party C and a DCVC-affiliated party) executed confidentiality agreements, each of which contained a customary “don’t ask don’t waive” standstill provision, but which permitted such party to make a private proposal to the Zymergen Board, and received diligence information, including the Zymergen Projections. Three such parties participated in meetings with Zymergen’s management. Four such parties (Ginkgo, Party A, Party B and Party C) expressed interest in submitting a formal proposal to acquire Zymergen and were provided bid process letters, but only Ginkgo and Party A submitted proposals to acquire Zymergen. Prior to signing the Merger Agreement, the other parties that declined to pursue such transaction cited, among other reasons, concerns with Zymergen’s cash burn and anticipated challenges integrating Zymergen’s diverse businesses within such parties’ existing organizations.

On April 15, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, Zymergen management presented the

 

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Zymergen Projections that were previously provided for the Zymergen Board’s review. The Zymergen Board engaged in detailed discussion and asked questions on, among other things, the underlying inputs and assumptions in the Zymergen Projections. After discussion, the Zymergen Board approved the Zymergen Projections for use by Cowen in connection with its financial analyses, including if later requested, in rendering a fairness opinion to the Zymergen Board and authorized its distribution to potentially interested parties in the strategic review process. The Zymergen Board and its advisors then discussed the next steps in the strategic alternatives review process, the preparation of a bid process letter by Cowen with the assistance of Zymergen management and Freshfields for distribution to parties that indicate a desire to formally submit a proposal to acquire Zymergen, and an illustrative sale process timeline that contemplated two rounds of bidding with first round proposals due by May 13, 2022.

During the month of April 2022, Ginkgo and Party A each expressed an interest in formally submitting a proposal to acquire Zymergen and were provided a bid process letter by Cowen, at the direction of the Zymergen Board, on April 22, 2022 and April 26, 2022, respectively. The bid process letter invited each party to submit a non-binding proposal by May 13, 2022 and requested that each party provide as part of its proposal, among other things, an indicative price to acquire 100.0% of Zymergen and details on such bidder’s strategic plans for Zymergen, including as it relates to those materially affected by Zymergen’s conduct and Zymergen’s stated public benefit purpose.

On April 25, 2022, Zymergen granted access to its virtual data room to Ginkgo to facilitate Ginkgo’s evaluation of a potential transaction with Zymergen. Over the next several weeks, representatives of Ginkgo conducted documentary due diligence on Zymergen.

On May 2, 2022, Zymergen granted access to its virtual data room to Party A to facilitate Party A’s evaluation of a potential transaction with Zymergen.

On May 4, 2022, the Zymergen Board held a regularly scheduled meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, participants discussed, among other things, an update on the status of the strategic alternatives review process and key next steps in anticipation of receiving initial indications of interest from parties participating in the processes related to the sale of Zymergen, and the Zymergen Board instructed Freshfields to prepare a draft merger agreement to be provided to parties in the next bidding round with respect to an acquisition of Zymergen. Following Cowen’s departure from the meeting, Mina Kim, Zymergen’s Chief Legal Officer, reviewed with the directors the terms of a potential engagement letter with Cowen to assist with the Zymergen Board’s strategic alternatives review process and Cowen’s disclosure of material investment banking relationships with all parties participating in the strategic alternatives review process, both of which had been previously provided to the Zymergen Board. Following discussion, the directors of the Zymergen Board unanimously determined that none of the relationships were material, that it was in the best interests of Zymergen to engage Cowen, and authorized Zymergen’s entry into the engagement letter with Cowen. The Zymergen Board also discussed whether additional parties should be considered in the strategic review process, including, among others, two parties affiliated with DCVC. Given Mr. Ocko’s affiliation with DCVC, he recused himself from the meeting and it was noted that Mr. Ocko had agreed to recuse himself from all future discussions of the strategic review process (and from receipt of all board materials related to the strategic review process) if either DCVC-affiliated party indicated an interest in engaging in a strategic transaction with Zymergen. After discussion, the Zymergen Board (with Mr. Ocko absent) determined that Zymergen should reach out to such DCVC-affiliated parties to explore their potential interest in pursuing a strategic transaction. While one such DCVC-affiliated party entered into a customary confidentiality agreement, none of the DCVC-affiliated parties ultimately expressed any interest in pursuing a transaction with Zymergen.

Beginning May 5, 2022 and continuing through June 23, 2022, representatives of Ginkgo and Zymergen, with their respective legal and financial advisors also in attendance, participated in a number of management meetings and due diligence sessions regarding Zymergen.

 

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On May 11, 2022, at the direction of the Zymergen Board representatives of Cowen communicated to Allen & Company that the Zymergen Board would consider a sale of the whole company but was not at that time interested in pursuing a carve-out transaction.

On May 12, 2022, Zymergen announced its preliminary financial results for the first quarter of 2022, reporting total revenue of $4.8 million compared to a street consensus of $3.34 million and loss per share of ($0.70) compared to a street consensus of ($0.75). Also that day, Zymergen filed its $200 million shelf registration statement for a potential ATM offering. Zymergen Common Stock traded higher by 15.0% the following day and closed at $1.64 per share.

Also on May 12, 2022, a representative of Party A, a private company, sent a letter to Cowen presenting a non-binding proposal for an acquisition of control of Zymergen. Under the proposal, Party A would contribute certain assets and expertise to Zymergen and, in exchange, a newly formed subsidiary of Party A would receive newly issued shares of Zymergen Common Stock representing 80.0% of all then issued and outstanding equity of Zymergen, with Zymergen’s pre-transaction stockholders retaining 20.0% equity in Zymergen. According to the letter, the proposal valued Zymergen at approximately $293 million (which implied $2.62 per share of Zymergen Common Stock, if calculated using the diluted share count at the time of signing the Merger Agreement). This proposal implied an 85.0% premium based on the closing price of Zymergen Common Stock on May 12, 2022 of $1.42.

On May 13, 2022, Ginkgo management sent Cowen a non-binding proposal on behalf of Ginkgo for an acquisition of Zymergen in an all-stock transaction to combine Ginkgo and Zymergen and following which Zymergen’s stockholders would own approximately 5.0% of Ginkgo after giving effect to the transaction, subject to additional due diligence and the negotiation of a definitive merger agreement (the “May 13 Proposal”). Based on the closing price of Ginkgo Class A Common Stock on May 13, 2022 of $2.66, the May 13 Proposal valued Zymergen at approximately $222 million or $2.15 per share of Zymergen Common Stock, which implied a 31.0% premium based on the closing price of Zymergen Common Stock that day of $1.64 per share. The May 13 Proposal contemplated that the exchange ratio would be fixed at the time the merger agreement was signed and included a request for an exclusivity period of three weeks, subject to consecutive one-week extensions under certain circumstances.

On May 15, 2022, at the direction of the Zymergen Board, representatives of Cowen informed representatives of Allen & Company that Ginkgo would need to re-submit a more competitive proposal in order to potentially obtain exclusivity.

On May 18 and May 19, 2022, the Zymergen Board (which included Mr. Ocko) held meetings with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meetings, representatives of Cowen reviewed, and provided an update on, the status of all three strategic alternatives that had been explored in parallel to date: (1) a sale of Zymergen, (2) a carve-out transaction involving the financing and separation or sale of the automation business (including potentially in combination with the separation of other Zymergen businesses) and (3) continuing to operate on a stand-alone basis under its current strategic plan and obtaining financing through a PIPE or ATM Offering. Representatives of Cowen explained the current challenges in equity markets, negative economic outlook, mixed first quarter earnings performance by Zymergen’s peers, and feedback received by potentially interested parties in Zymergen’s strategic review process. They indicated that potential financing strategies such as an ATM Offering or PIPE could prove challenging for Zymergen at this time. They also shared feedback from potential investors in a PIPE transaction that had declined to engage, citing, among other reasons, Zymergen’s cash burn. Representatives of Cowen also explained how interest in a carve-out transaction involving the financing and separation or sale of the automation business was challenging for Zymergen for reasons previously described at the February 25, 2022 meeting of the Zymergen Board and the feedback from parties that participated in the process and declined to pursue a transaction citing, among other reasons, that the automation business did not fit in the financial party’s investment portfolio. Zymergen management next presented on Zymergen’s projected cash balance, noting that

 

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Zymergen continued to expect a cash shortfall by mid-2023 if it remained a standalone company and had not received financing. As a result of these considerations and the lack of sufficient revenue generation, among other reasons, the Zymergen Board concluded that Zymergen’s ability to continue as a standalone company would be challenging and uncertain, even if it continued to pursue additional financing through an ATM Offering or otherwise. The Zymergen Board, together with representatives of Cowen and members of Zymergen management, also engaged in an in-depth discussion to evaluate the benefits and considerations with proceeding with a sale of Zymergen to a party such as Ginkgo or Party A. After discussion, the Zymergen Board determined to continue exploring a sale of Zymergen and to invite Ginkgo and Party A to the second round of the Zymergen sale process in which they would each be expected to re-submit a more competitive proposal and a mark-up of the draft merger agreement by May 25, 2022.

On May 18, 2022, at the direction of the Zymergen Board, representatives of Cowen contacted representatives of Allen & Company to request that Ginkgo submit a revised proposal, together with a mark-up of an initial draft merger agreement to be provided by Zymergen.

On May 19, 2022, at the direction of the Zymergen Board, Cowen sent representatives of Ginkgo and Party A final round bid process letters inviting Ginkgo and Party A to submit revised proposals and to include with their proposals a mark-up of an initial draft merger agreement to be provided by Zymergen, which was uploaded to the virtual data room later that day. Additionally, in order to better assess Party A’s proposal, Cowen requested that Party A provide additional supporting details regarding its proposal, including, among other things, Party A’s plans with respect to the post-closing integration of Zymergen, details on the assets Party A intended to contribute, and details on Party A’s business and its affiliates.

Also that day, in response to interest expressed by Party B and Party C, each a strategic party, and at the direction of the Zymergen Board, Cowen sent bid process letters to Party B and Party C. Neither Party B nor Party C subsequently submitted a proposal, each citing concerns with Zymergen’s cash burn.

On May 25, 2022, a representative of Party A sent Cowen a revised non-binding proposal, the terms of which were substantially identical to those of its May 12, 2022 proposal (including an implied valuation, according to the proposal, of $293 million). The revised proposal included a markup of certain provisions of the draft merger agreement.

On May 27, 2022, Ginkgo management sent Cowen a revised non-binding proposal for an acquisition of Zymergen, subject to additional due diligence and the negotiation of a definitive merger agreement (the “May 27 Proposal”), and a full markup of the draft merger agreement. The May 27 Proposal proposed that Ginkgo would acquire Zymergen in an all-stock transaction that would result in Zymergen’s stockholders owning approximately 5.0% of Ginkgo after giving effect to the transaction. The May 27 Proposal valued Zymergen at approximately $280 million, or $2.50 per share of Zymergen Common Stock, based on the closing price of Ginkgo Class A Common Stock on May 26, 2022 of $2.96 (which implied a 116.0% premium, based on the closing price of Zymergen Common Stock on May 26, 2022 of $1.16 per share). The May 27 Proposal proposed that the exchange ratio would be fixed at the time the merger agreement was signed, contemplated that additional consideration would be paid to Zymergen’s stockholders to the extent Zymergen’s cash balance at closing, after giving effect to the payment of transaction costs and settlement of debt, exceeded $100 million, and requested an exclusivity period of three weeks, subject to consecutive one-week extensions under certain circumstances.

On May 27, 2022, the Zymergen Board held a meeting with Zymergen management, representatives of Cowen and advisors from Freshfields participating. At the meeting, representatives of Cowen reviewed the revised proposals from Ginkgo and Party A and noted that, although Ginkgo had increased the value of its price indication by approximately 16.0% compared to the May 13 Proposal, the May 27 Proposal had introduced additional closing uncertainty in the form of a proposed closing condition with respect to Zymergen’s net cash balance at closing. Advisors from Freshfields then provided Freshfields’ assessment of the comments received on the draft merger agreement by each of Ginkgo and Party A, noting that, because Party A had provided an

 

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incomplete markup of the draft merger agreement, it was difficult to assess Party A’s position on certain key terms and conditions. Cowen then noted that additional information was needed to better assess Party A’s proposal, but that Party A had not adequately responded to certain questions posed to clarify aspects of its proposal. As such, Cowen noted that there was a lack of adequate information provided by Party A to support its proposal, its contributed asset valuations, and address outstanding integration, operations, financial concerns, as well as certain litigation and other risks involving Party A’s affiliates. Advisors from Freshfields reviewed with the Zymergen Board the material revisions in Ginkgo’s proposed draft merger agreement, which, among other things, (1) included a minimum cash closing condition that Zymergen’s net cash at closing be at least $100 million, (2) included a provision expressly disclaiming any obligation by Ginkgo to agree to any divestitures or other remedial actions in order to obtain required antitrust clearances, (3) included a “force the vote” requirement which would not permit Zymergen to terminate the merger agreement to accept a superior proposal and (4) proposed a termination fee of 3.5% of Zymergen’s equity value, plus reimbursement of Ginkgo’s expenses, payable by Zymergen under certain circumstances (instead of 2.5% of equity value as originally proposed by Zymergen). After a discussion with Zymergen management and its advisors, the Zymergen Board instructed representatives of Cowen and advisors from Freshfields to negotiate these issues and instructed Zymergen management to request that Ginkgo increase the transaction price to at least $3.50 per share. The Zymergen Board also instructed Zymergen management, representatives of Cowen and advisors from Freshfields to progress transaction negotiations with Ginkgo and instructed Zymergen management to speak with SoftBank, Zymergen’s largest stockholder, regarding its willingness to enter into a voting agreement (as Ginkgo had indicated its desire that SoftBank and certain other stockholders enter into voting agreements in connection with a potential transaction). The Zymergen Board further determined that neither Ginkgo nor any stockholders entering into voting agreements with Ginkgo in connection with a transaction between Zymergen and Ginkgo would be subject to restrictions on business combinations under Section 203 of the DGCL as “interested stockholders” of Zymergen by virtue of such outreach, negotiation or entry into such voting agreements. The Zymergen Board also instructed Cowen to engage with Party A to address key concerns and issues that had been identified with its proposal. As directed by the Zymergen Board, Cowen subsequently engaged with each of Party A and Ginkgo and its advisors.

On May 31, 2022, Mr. Flatley met with Dr. Kelly, and communicated that Ginkgo would need to raise its proposal to an exchange ratio that reflected a value for each share of Zymergen Common Stock of at least $3.50 in order for its proposal to be potentially acceptable to the Zymergen Board.

On June 2, 2022, Ginkgo management sent Cowen another revised non-binding proposal for an acquisition of Zymergen, subject to additional due diligence and the negotiation of a definitive merger agreement (the “June 2 Proposal”), and a further markup of the draft merger agreement. The June 2 Proposal indicated that it was Ginkgo’s “best and final” offer, and that the proposal would be withdrawn if Zymergen did not enter into a customary exclusivity agreement with Ginkgo by 5:00 p.m. Eastern time on June 3, 2022. The June 2 Proposal proposed that Ginkgo would acquire Zymergen in an all-stock transaction that would result in Zymergen’s stockholders owning 5.75% of Ginkgo after giving effect to the transaction. As compared with the May 27 Proposal, the June 2 Proposal did not condition the receipt of merger consideration or closing the transaction on Zymergen maintaining a net cash balance above a certain level, which would have increased risks with respect to closing certainty. The June 2 Proposal valued Zymergen at approximately $392 million, or $3.51 per share of Zymergen Common Stock, based on the closing price of Ginkgo Class A Common Stock on June 2, 2022 of $3.48. The closing price of Zymergen Common Stock on June 2, 2022 was $1.68 per share.

On June 3, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, the Zymergen Board discussed the terms of the June 2 Proposal, the potential benefits and risks of the proposed transaction to Zymergen’s stockholders, those materially affected by Zymergen’s conduct and Zymergen’s public benefit purpose, the premium implied by the proposed consideration to be paid to Zymergen’s stockholders (which exceeded the latest proposal from Party A) and the various risks and challenges facing Zymergen on a standalone basis or in continuing to pursue another strategic alternative transaction. Participants noted that if the exchange ratio that equated to 5.75% of

 

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Ginkgo after giving effect to the transaction under the June 2 Proposal would not be fixed until signing the merger agreement at the end of the month, stock trading volatility before then could materially and adversely affect the premium implied by Ginkgo’s proposal. To address this concern, the Zymergen Board instructed Zymergen’s management and representatives of Cowen to communicate a counterproposal to Ginkgo that Zymergen would accept Ginkgo’s proposal if the exchange ratio set at signing reflected a value for each share of Zymergen Common Stock of at least $3.51 per share (which was the stock price implied if Zymergen stockholders owned 5.75% of Ginkgo after giving effect to the transaction as of the date of the June 2 Proposal). The Zymergen Board expressed a desire to communicate this counterproposal as a clarification of the June 2 Proposal and not a condition to Zymergen’s entry into exclusivity with Ginkgo. Advisors from Freshfields then reviewed with the Zymergen Board the material issues that remained outstanding in Ginkgo’s revised draft merger agreement. Advisors from Freshfields then reviewed with the Zymergen Board, among other things, its fiduciary duties in considering whether to grant exclusivity to Ginkgo. After discussion, the Zymergen Board determined to proceed with Ginkgo’s proposal and execute an exclusivity agreement subject to Cowen conveying the Zymergen Board’s expectation that the exchange ratio would be set at signing to reflect a value of at least $3.51 per share of Zymergen Common Stock. In addition, the Zymergen Board instructed Zymergen management and its advisors to finalize transaction documents and conduct additional reverse due diligence on Ginkgo.

Later that day, Cowen conveyed to Ginkgo that Zymergen was willing to enter into exclusivity and once again highlighted the Zymergen Board’s expectation regarding the exchange ratio, which Ginkgo acknowledged but to which Ginkgo did not agree. The next day, at the direction of the Zymergen Board, Zymergen entered into an exclusivity agreement with Ginkgo that would expire at 11:59 p.m. New York time on June 24, 2022, but which would terminate earlier in the event that Ginkgo proposed to lower the transaction consideration to be paid in the proposed transaction.

On June 12, 2022, advisors from Freshfields sent a revised draft of the merger agreement to representatives of Ropes & Gray that, among other things, (1) added back an express obligation for Ginkgo to take any action and agree to any remedy that may be required to obtain antitrust clearances, (2) added back the Zymergen Board’s “fiduciary out” to terminate the transaction with Ginkgo and accept a superior proposal and (3) reverted to a termination fee of 2.5% of Zymergen’s equity value payable by Zymergen under certain circumstances.

Later that month, Mr. Flatley received two inbound expressions of interest by two strategic private companies (“Party D” and “Party E”, respectively) that were not originally included in Zymergen’s strategic process outreach prior to entering into exclusivity with Ginkgo. Mr. Flatley declined to set up meetings with such parties given Zymergen’s exclusivity agreement with Ginkgo and the fact that no specific terms of a transaction had been presented by such parties.

On June 14, 2022, Ginkgo conducted a site visit at Zymergen’s site in Emeryville, California in connection with its due diligence review of Zymergen’s technology as well as its real estate and related cost commitments.

On June 16, 2022, Ginkgo and Zymergen entered into a new mutual confidentiality agreement to facilitate Zymergen’s due diligence review of Ginkgo, which superseded and replaced the confidentiality agreement entered into by the parties on March 16, 2022. Later that day and again on June 17 and July 18, 2022, members of Ginkgo management gave business and legal updates to Zymergen on reverse due diligence calls, at which Ginkgo’s and Zymergen’s respective legal advisors were also present.

On June 17, 2022, Ropes & Gray sent a revised draft of the merger agreement to Freshfields that, among other things, (1) reverted to a provision that expressly disclaimed any obligation by Ginkgo to agree to any remedy in order to obtain required antitrust clearances, (2) removed the Zymergen Board’s “fiduciary out” to terminate the transaction with Ginkgo and accept a superior proposal and (3) reverted to a termination fee of 3.5% of Zymergen’s equity value, plus reimbursement of Ginkgo’s expenses, payable by Zymergen under certain circumstances. That same day, Ropes & Gray also sent Freshfields a draft voting agreement to be entered into by

 

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each of SoftBank, DCVC and True Ventures, three significant stockholders of Zymergen that, as of such time, collectively held approximately 40.0% of the issued and outstanding shares of Zymergen Common Stock. Following that day until the signing of the Merger Agreement, Ropes & Gray, Freshfields and the Voting Agreement Stockholders exchanged drafts and negotiated the terms of the voting agreements.

On June 21, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. Participants discussed the inquiries received from Party D and Party E, noting that it was unlikely that either Party D or Party E would be able to meaningfully compete with Ginkgo’s proposal given, among other things, the size, lines of business and private company status of both parties as compared to Ginkgo, and the potential synergies that could be realized in a transaction with Ginkgo. Representatives of Cowen then presented Cowen’s preliminary financial analyses of the June 2 Proposal noting various modifications made to the assumptions underlying such financial analyses, including, among other things, the revised list of public trading comparables, changes to precedent transaction analysis and an increase in the terminal growth rate used for the discounted cash flow analysis. Since Ginkgo had not agreed to the Zymergen Board’s counterproposal to set the exchange ratio to reflect a value of at least $3.51 for each share of Zymergen Common Stock, representatives of Cowen provided analyses of the June 2 Proposal assuming two scenarios of the June 2 Proposal. Under the first scenario in which Ginkgo’s offer was set at an exchange ratio that was not fixed to reflect a value of at least $3.51 per share of Zymergen Common Stock, the June 2 Proposal valued Zymergen at approximately $266.9 million, or $2.39 per share of Zymergen Common Stock based on the closing price of Ginkgo Class A Common Stock on June 17, 2022 of $2.37 (implying a 67.0% premium over the closing price of Zymergen Common Stock on June 17, 2022 of $1.43 per share). Under the second scenario in which Ginkgo’s offer was set at an exchange ratio that was fixed to reflect a value of at least $3.51 per share, the June 2 Proposal would, at a minimum, value Zymergen at approximately $391.9 million based on the closing price of Ginkgo Class A Common Stock on June 17, 2022 of $2.37 (implying a 145.0% premium over the closing price of Zymergen Common Stock on June 17, 2022 of $1.43 per share and equating to 8.22% of Ginkgo after giving effect to the transaction). Representatives of Cowen noted that fixing the exchange ratio to reflect a value of at least $3.51 per share might result in meaningful dilution to Ginkgo stockholders and could require a vote of Ginkgo’s stockholders to approve the transaction if Ginkgo issued to Zymergen stockholders a number of shares that is equal to 20.0% or more of the shares of Ginkgo Class A Common Stock outstanding prior to the consummation of the transaction. As such, the Zymergen Board and other participants at the meeting discussed potential ways in which the parties could reach a compromise, including removing an expected minimum value of $3.51 per share required by the exchange ratio and instead agreeing on an exchange ratio that would allocate 7.0% ownership (instead of 5.75%) of Ginkgo after giving effect to the transaction to Zymergen’s stockholders.

Dr. Serber and advisors from Freshfields then discussed with the Zymergen Board certain considerations and findings from Zymergen’s reverse due diligence (which included legal and business diligence) on Ginkgo for directors of the Zymergen Board to take into account in performing the balancing of stockholders’ interests, the interests of those materially affected by Zymergen’s conduct and Zymergen’s specific public benefit purpose required of directors of a public benefit corporation such as Zymergen to fulfill their fiduciary duties. These considerations and findings included, among other things, (1) the fact that Zymergen would survive the Merger as a wholly owned subsidiary and a Delaware public benefit corporation with the same public benefit purpose as that of Zymergen prior to the Merger, (2) the fact that the Merger would potentially broaden the product mix and reach of Zymergen’s technology through Ginkgo’s platform, (3) the fact that Ginkgo values and empowers its employees by granting them Ginkgo Class B Common Stock that have ten times the voting power of Ginkgo Class A Common Stock, (4) the cultural alignment between Zymergen and Ginkgo, including a shared vision for using biology to change the way that physical materials impact the world, (5) Ginkgo’s stated intent to work with Zymergen on its retention plan and support the potential spin-outs of Zymergen’s advanced materials and drug discovery businesses and (6) the fact that Zymergen stockholders would be receiving stock in Ginkgo, which is a company that has implemented environmental, social and governance (“ESG”) initiatives that are similar to those of Zymergen, including that Ginkgo’s charter permits the Ginkgo Board to consider the effects of corporate actions on various stakeholders in addition to its stockholders. At the request of Freshfields, each of Cowen and members of the Zymergen Board confirmed no update regarding their respective relationships with Ginkgo.

 

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Zymergen management provided an update on the status of Ginkgo’s due diligence review. Participants then discussed the status of material outstanding issues that the parties had continued to negotiate, including, among other things, deal price, the size of the termination fee that would be payable by Zymergen under specified circumstances, and Ginkgo’s obligations to obtain antitrust clearances. Zymergen management then led a discussion with the Zymergen Board of a review of Zymergen’s performance relative to its 2022 budget, which had been shared with Ginkgo on the prior day. Zymergen management explained that Zymergen was underperforming on the 2022 budget approved by the Zymergen Board, noting that Zymergen was now on track to have an ending cash balance for the year of $96 million (as compared to $110 million under the 2022 budget), with real estate related risks identified as the most significant driver for the variance. Zymergen management also reviewed the cash impact of certain merger related expenses, including merger related fees, employee retention costs and also the impact of reduction in force measures required in the normal course of operations to reduce steady state cash burn and how such measures would result in additional costs that would impact Zymergen’s budget, further reducing Zymergen’s projected ending cash balance for the year.

Also that day, Freshfields sent a revised draft of the merger agreement to Ropes & Gray that, among other things, (1) added back an express obligation for Ginkgo to take any action and agree to any remedy that may be required to obtain antitrust clearances, and introduced two extensions of the outside date if necessary antitrust clearances are not obtained, (2) added back the Zymergen Board’s “fiduciary out” to terminate the transaction with Ginkgo and accept a superior proposal, but clarified that an acquisition proposal for only the automation business would not constitute a superior proposal, and (3) proposed a termination fee of 3.0% of Zymergen’s equity value payable by Zymergen under certain circumstances.

On June 20, 2022, at the direction of the Zymergen Board, representatives of Cowen called representatives of Allen & Company to indicate that Zymergen Board would not consider a proposal that did not result in Zymergen stockholders owning approximately 7.0% of Ginkgo after giving effect to the transaction.

On June 23, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, Mr. Flatley informed the Zymergen Board that Dr. Kelly had called him earlier that day to raise certain issues, including potential decreases in Zymergen’s cash balance, the status of the construction of Zymergen’s new headquarters and Zymergen’s ability to sublease its existing properties, as well as the continued cash burn that would be incurred if closing were delayed and Zymergen’s pending securities litigation. Mr. Flatley then informed the Zymergen Board that Dr. Kelly had communicated to him that, in light of these concerns, Ginkgo was prepared to proceed with an all-stock transaction that would result in Zymergen’s stockholders owning 4.0% of Ginkgo after giving effect to the transaction (the “June 23 Proposal”), and that the Ginkgo Board was no longer willing to proceed with a transaction at the valuation implied by the June 2 Proposal given these concerns. After a discussion with Zymergen management and its advisors, the Zymergen Board instructed management to communicate to Ginkgo that Zymergen was not willing to proceed with a transaction on the basis of the decreased valuation proposed by the June 23 Proposal and that, while Zymergen remained ready to move forward on more agreeable terms, Zymergen would be pursuing other strategic alternatives given that the exclusivity agreement had terminated on its terms as a result of Ginkgo reducing its proposal. Following the meeting, Mr. Flatley called Dr. Kelly and conveyed this message, and Zymergen terminated access to the virtual data room for Ginkgo and its representatives.

On June 29, 2022, the Zymergen Board held a meeting with Zymergen management to assess next steps and available alternatives, representatives of Cowen and advisors from Freshfields participating. At the meeting, representatives of Cowen then presented Cowen’s preliminary financial analyses of the June 23 Proposal and of Zymergen, noting various modifications made to the assumptions underlying Cowen’s financial analyses, given, among other things, the continued downward trend in stock prices of public comparable companies and an increase in projected dilution to Zymergen’s Common Stock based on its forecasted capital raise needs as a standalone company. The Zymergen Board then discussed potential strategic alternatives for Zymergen, including, among other things, additional restructuring options that Zymergen could pursue to remain a

 

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standalone company, pursuing a strategic transaction for its individual businesses and re-engaging with Ginkgo to sell the company. After discussion, the Zymergen Board concluded that Zymergen should undergo such additional restructuring measures, while concurrently exploring strategic alternatives to sell individual businesses. The Zymergen Board also instructed management and Cowen to re-engage with Ginkgo and its advisors to explore the possibility of reaching an agreement on a sale of the company that, among other things, reflected a higher valuation for Zymergen than the June 23 Proposal.

On July 7, 2022, Mr. Flatley called Dr. Kelly to inform him that Zymergen was continuing to explore strategic alternatives, including a spin-out transaction involving the financing and separation of the automation business, which would make a sale of Zymergen to Ginkgo an unlikely possibility. Mr. Flatley also reiterated that the Zymergen Board would not be willing to re-engage with Ginkgo in order to proceed with a sale to Ginkgo unless Ginkgo increased its proposed valuation of Zymergen. Also during that call, Mr. Flatley informed Dr. Kelly that Freshfields would share with Ropes & Gray a revised draft of the merger agreement.

On July 9, 2022, Mr. Flatley and Dr. Kelly discussed proceeding with a transaction at a fixed exchange ratio based on a percentage ownership by Zymergen stockholders in Ginkgo after giving effect to the transaction. Mr. Flatley noted that the Zymergen Board would be unlikely to agree to pro forma ownership of Zymergen stockholders of less than mid-5%. Following negotiation, Dr. Kelly ultimately proposed 5.25% pro forma ownership for Zymergen stockholders. Mr. Flatley agreed to present Ginkgo’s proposal to the Zymergen Board. Later that day, Freshfields sent a revised draft of the merger agreement to Ropes & Gray. In response to Ginkgo’s previously stated concerns about Zymergen’s real estate expenditures and its cash burn, the revised draft included, among other things, a closing condition that contemplated if Zymergen’s real estate spending exceeded an agreed-upon budget by an agreed-upon amount prior to closing, then Ginkgo would have no obligation to close the merger. In the following days, Mr. Flatley called Dr. Kelly to discuss various aspects of the draft merger agreement, including regulatory clearance matters, employee matters, and Zymergen’s real estate expenditures.

On July 11, 2022, Zymergen reopened its virtual data room for Ginkgo and its representatives. Thereafter, until the signing of the Merger Agreement, representatives of Ginkgo and its advisors continued conducting due diligence on Zymergen and participated with Zymergen and its advisors in a number of management meetings and due diligence sessions regarding Zymergen.

Also on July 11, 2022, the Zymergen Board held a meeting with Zymergen management, representatives of Cowen and advisors from Freshfields participating. At the meeting, Mr. Flatley discussed, among other things, the feedback he had received from Dr. Kelly with respect to various aspects of the draft merger agreement. In addition, Mr. Flatley noted that Dr. Kelly proposed a transaction that would result in pro forma ownership of Zymergen stockholders in Ginkgo of 5.25% after giving effect to the transaction.

On July 12, 2022, Ropes & Gray sent a revised draft of the merger agreement to Freshfields, which, among other things, reinstated a provision that expressly disclaimed any obligation by Ginkgo to agree to any remedy in order to obtain required antitrust clearances, but agreed to extend the outside date if necessary antitrust clearances are not obtained and accepted a Company termination fee equal to 3.0% of Zymergen’s equity value, with no expense reimbursement, and the Zymergen Board’s “fiduciary out” to terminate the transaction with Ginkgo and accept a superior proposal.

On July 13, 2022, Dr. Kelly called Mr. Flatley to communicate a revised proposal in which Ginkgo would acquire Zymergen in an all-stock transaction that would result in Zymergen’s stockholders owning 5.25% of Ginkgo after giving effect to the transaction (the “July 13 Proposal”). The July 13 Proposal valued Zymergen at approximately $305.8 million, or $2.74 per share of Zymergen Common Stock, based on the closing price of Ginkgo Class A Common Stock on July 12, 2022 of $2.99 (implying a 52% premium based on the closing price of Zymergen Common Stock on July 12, 2022 of $1.80).

 

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Later that day, the Zymergen Board held a meeting with Zymergen management, representatives of Cowen and advisors from Freshfields participating. At the meeting, representatives of Cowen presented its preliminary financial analyses of the proposal for Ginkgo to acquire Zymergen in an all-stock transaction that would result in Zymergen’s stockholders owning 5.25% of Ginkgo after giving effect to the transaction, and of Zymergen, noting various modifications made to the assumptions underlying Cowen’s financial analyses, given, among other things, the continued downward trend in stock prices of public comparable companies. Advisors from Freshfields then discussed with the Zymergen Board the remaining material open issues in the draft merger agreement, which included, among other things, Ginkgo’s effort obligation to obtain antitrust clearances and the allocation of risk relating to Zymergen’s pending securities litigation. Following discussion with management and its advisors, the Zymergen Board instructed management to inform Ginkgo that Zymergen was willing to move forward with an all-stock transaction that would result in Zymergen’s stockholders owning 5.25% of Ginkgo after giving effect to the transaction, subject to the parties agreeing on acceptable compromises to the open issues in the draft merger agreement.

On July 14, 2022, members of Zymergen’s and Ginkgo’s management, together with Zymergen’s and Ginkgo’s respective advisors, held a meeting to discuss the remaining issues in the draft merger agreement. From July 14, 2022 to July 20, 2022, Freshfields and Ropes & Gray continued to negotiate, and Zymergen and Ginkgo management teams continued to discuss, the terms of the draft merger agreement, which included Zymergen agreeing to Ginkgo’s proposal with respect to a provision expressly disclaiming any obligation by Ginkgo to agree to any remedy in order to obtain required antitrust clearances but, in the event the merger agreement were terminated from a failure to satisfy closing conditions related to antitrust clearances, Ginkgo would pay Zymergen a termination fee equal to 3% of Zymergen’s equity value.

On July 20, 2022, the Zymergen Board held a meeting with Zymergen management and representatives of Cowen and advisors from Freshfields participating. At the meeting, advisors from Freshfields reviewed with the Zymergen Board the remaining material open issue in the draft merger agreement. Representatives of Cowen then presented Cowen’s preliminary financial analyses of the July 13 Proposal and of Zymergen, noting various modifications made to the assumptions underlying Cowen’s financial analyses, given, among other things, Zymergen’s actual financial results for the quarter ended June 30, 2022 and the continued downward trend in stock prices of public comparable companies.

Over the course of July 21, 2022 and July 22, 2022, advisors from Freshfields and Ropes & Gray exchanged drafts of, and participated in calls to discuss, the draft merger agreement and the various ancillary documents, in coordination, respectively with Zymergen, Ginkgo and the Voting Agreement Stockholders. On July 22, 2022, in accordance with the directives of Zymergen and Ginkgo, representatives of Cowen and Allen & Company discussed a final proposed fixed exchange ratio of 0.9179 of a share of Ginkgo Class A Common Stock for each share of Zymergen Common Stock, representing approximately 5.25% pro forma ownership of Zymergen stockholders in Ginkgo after giving effect to the transaction and implying a value of $2.68 per share of Zymergen Common Stock.

On Saturday, July 23, 2022, the Zymergen Board held a meeting with Zymergen management, representatives of Cowen and advisors from Freshfields participating. Advisors from Freshfields reviewed with the Zymergen Board its fiduciary duties as directors of a Delaware public benefit corporation in connection with a potential sale of the company and discussed with the Zymergen Board the proposed final terms of the draft merger agreement and draft voting agreements. Representatives of Cowen then reviewed with the Zymergen Board Cowen’s financial analyses of the exchange ratio which would result in the stockholders of Zymergen owning 5.25% of Ginkgo after giving effect to the Merger, and rendered to the Zymergen Board an oral opinion that, as of July 23, 2022, and based upon and subject to the various assumptions, qualifications and limitations upon the review undertaken in preparing its opinion, the exchange ratio of 0.9179 to be received by the holders of Zymergen Common Stock in the Merger Agreement was fair, from a financial point of view, to the holders of Zymergen Common Stock (other than holders of certain excluded shares specified in the Merger Agreement). The oral opinion of Cowen was subsequently confirmed by the delivery of a written opinion delivered after the

 

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meeting, dated July 24, 2022. Additional information pertaining to the fairness opinion of Cowen is set forth in the section of this proxy statement/prospectus captioned “—Opinion of the Financial Advisor to Zymergen”.

The Zymergen Board further discussed the proposed merger agreement and various reasons and factors that members of the Zymergen Board considered in forming their view that Zymergen’s entry into the Merger Agreement was advisable, fair and in the best interests of Zymergen, its stockholders, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen. The Zymergen Board noted, among other things, (1) its belief in the strategic benefits of the Merger, (2) the macroeconomic risks in the market and industry, (3) Zymergen’s current and future liquidity needs and available capital, (4) Zymergen’s execution risks and uncertainties associated with achieving the Company Projections, (5) the exhaustive strategic alternatives review process that was undertaken and involved 110 potentially interested parties and the flexibility that such parties were given to bid on one or more of Zymergen’s businesses in order for Zymergen to seek the best strategic alternative for its stockholders, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen, (6) that Zymergen had executed confidentiality agreements with 18 parties to receive diligence information, (7) the offer from Ginkgo was the highest offer received for the acquisition of Zymergen, including as compared to the last proposal by Party A, (8) the fact that Zymergen would survive the Merger as a wholly owned subsidiary and a Delaware public benefit corporation with the same public benefit purpose as that of Zymergen prior to the Merger, (9) the cultural alignment between Zymergen and Ginkgo, including with respect to promoting Zymergen’s public benefit purpose, ESG initiatives, empowering their employees and considering various stakeholders (including as discussed at the Zymergen Board meeting on June 21, 2022), (10) that a transaction with Party A contained material risks and uncertainties given, among other things, the regulatory scrutiny and clearances that would be expected for such transaction, the lack of adequate information provided by Party A to support its proposal, and asset valuations, and address post-closing integration, operations and financial concerns, and certain litigation and other risks involving Party A affiliates, (11) the drawbacks and risks in executing a sale of parts or a carve-out transaction structure with multiple parties, including the timing to negotiate a multiparty transaction, (12) the risk of downward price adjustments over the course of lengthy negotiations and risk allocation among the multiple parties, (13) potential cross-conditionality and the confusion and uncertainty such process would create for Zymergen’s employees, (14) the Zymergen Board’s belief that the premium of approximately 34.0% to the unaffected stock price of Zymergen Common Stock on July 22, 2022 (the last trading day prior to an announcement of the signing of the Merger Agreement) was more favorable to stockholders than the likely value that would result from other potential alternatives available to Zymergen, including remaining independent and (15) the financial analyses presented by Cowen and the delivery of its opinion.

The Zymergen Board then, taking into account all of the foregoing and its previous meetings and presentations, including each of the matters set forth in the section of this proxy statement/prospectus captioned “—Zymergen Board Recommendation and Its Reasons for the Merger”, and after balancing the financial interests of Zymergen stockholders, those materially affected by Zymergen’s conduct and Zymergen’s specific public benefit purpose, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger are advisable, fair and in the best interests of Zymergen, its stockholders, those materially affected by Zymergen’s conduct and the public benefit purpose of Zymergen, (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 by Zymergen of the Merger Agreement, the performance by Zymergen of its covenants and other obligations thereunder, and the consummation of the transactions contemplated thereby, including the Merger, upon the terms and subject to the conditions set forth therein; (4) authorized and approved the Merger, upon the terms, and subject to the conditions, contained in the Merger Agreement, in accordance with the requirements of the DGCL; and (5) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL. In addition, the Zymergen Board approved the Voting Agreements, granted customary approvals, for purposes of Section 203 of the DGCL, with respect to the Merger Agreement and the Voting Agreements and, as permitted under the terms of the Merger Agreement, the Zymergen Board determined to waive all standstill provisions in the confidentiality agreements that Zymergen had entered into with interested parties as part of the

 

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Zymergen Board’s strategic review process. Additional information pertaining to the recommendation of the Zymergen Board is set forth in the section of this proxy statement/prospectus captioned “—Zymergen Board Recommendation and Its Reasons for the Merger”.

The following day on Sunday, July 24, 2022, Zymergen, Ginkgo and Merger Sub executed and delivered the Merger Agreement and the related transaction documents (including the Voting Agreements entered into by the Voting Agreement Stockholders), and prior to the start of trading on July  25, 2022, Zymergen and Ginkgo issued a joint press release announcing the execution of the Merger Agreement.

Ginkgo’s Reasons for the Merger

After careful consideration, the Ginkgo Board unanimously (i) determined it to be advisable and fair to, and in the best interests of, Ginkgo and its stockholders to enter into the Merger Agreement and the Voting Agreements, and to consummate the transactions contemplated thereby (including the Merger); and (ii) approved and adopted the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger).

In arriving at its determination, the Ginkgo Board held a number of meetings and consulted with Ginkgo’s management and its financial, accounting and legal advisors, and considered a number of positive factors in favor of the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger), including but not limited to the following, which are not necessarily listed in order of importance:

 

   

the acquisition of Zymergen is expected to improve Ginkgo’s technical capabilities and value proposition to Ginkgo’s customers by:

 

   

supporting Ginkgo’s platform scaling efforts as a result of the addition of Zymergen’s automation and software teams and the integration of Zymergen’s technology portfolio;

 

   

lowering program costs as a result of potential operational scaling and efficiencies; and

 

   

improving outcomes for Ginkgo’s customers as a result of the addition of Zymergen’s database and analysis tools that can be used to design strains and experiments for Ginkgo’s customers;

 

   

the anticipated ability of Ginkgo to manage pro forma operating expenses as the acquisition of Zymergen is expected to accelerate Ginkgo’s technical development plan and offset Ginkgo’s planned investments in headcount and equipment;

 

   

the potential value that may be unlocked in Zymergen’s product portfolio, including several materials assets in various stages of development as well as emerging drug discovery assets;

 

   

the expectation that structuring the Merger as an all-stock transaction will preserve Ginkgo’s existing balance sheet strength;

 

   

the favorability of the Exchange Ratio relative to the exchange ratios historically implied by the relative trading prices of Ginkgo Class A Common Stock and Zymergen Common Stock over various periods and relative to the current assessment of the valuation of each company and of the expected synergies and other benefits of the Merger;

 

   

the fact that, because the Exchange Ratio under the Merger Agreement will not be adjusted for changes in the market price of Ginkgo Class A Common Stock or Zymergen Common Stock, Ginkgo has greater certainty as to the number of shares of Ginkgo Class A Common Stock to be issued in the Merger;

 

   

the results of the due diligence investigation of Zymergen conducted by Ginkgo and its outside advisors;

 

   

the terms of the Merger Agreement, taken as a whole, as more fully described in the section of this proxy statement/prospectus captioned “The Merger Agreement” beginning on page 140, and the course

 

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of the negotiations of such terms, which terms included (not necessarily in order of relative importance) including:

 

   

the nature of the representations, warranties and covenants provided by Zymergen, including with respect to certain restrictions on Zymergen’s operations during the period prior to the completion of the Merger;

 

   

the nature of the closing conditions included in the Merger Agreement, including the condition that (i) Zymergen has not incurred or otherwise become liable for additional costs, expenses or liabilities with respect to its leased real property not contemplated by its real estate plan provided to Ginkgo prior to the execution of the Merger Agreement and (ii) certain specified litigation matters are not reasonably expected to result in future money damages payable by Zymergen or its subsidiaries (in excess of any applicable insurance deductible and coverage amounts), where, the aggregate of clauses (i) and (ii), exceed $25,000,000; and

 

   

the fact that Zymergen may be required to pay Ginkgo a termination fee of $10,000,000 under certain circumstances; and

 

   

the increased likelihood of obtaining the requisite approval of Zymergen’s stockholders for the Merger due to the fact that the Voting Agreement Stockholders (who collectively beneficially own, in the aggregate, approximately 40% of the issued and outstanding shares of Zymergen Common Stock as of July 22, 2022, the last trading day before the public announcement of the Merger Agreement) have agreed to vote the shares of Zymergen Common Stock beneficially owned by them in favor of, among other things, the approval of the Merger Agreement and the Merger and the other transactions contemplated by the Merger Agreement, and not to transfer, or enter into an agreement to transfer, their shares of Zymergen Common Stock, with certain limited exceptions.

The Ginkgo Board weighed the above factors against a number of potentially negative factors in its deliberations concerning the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger), including but not limited to the following, which are not necessarily listed in order of importance:

 

   

the risk that, because the Exchange Ratio under the Merger Agreement will not be adjusted for changes in the market price of Ginkgo Class A Common Stock or Zymergen Common Stock, the then-current trading price of the shares of Ginkgo Class A Common Stock to be issued to Zymergen stockholders upon the consummation of the Merger could be significantly higher than the trading price prevailing at the time the Merger Agreement was entered into;

 

   

the risk that Zymergen’s financial performance may not meet Ginkgo’s expectations, including as a result of Zymergen’s cash burn prior to closing of the Merger and its real estate cost commitments;

 

   

the risk of adverse outcomes of pending or threatened legal proceedings with respect to Zymergen, and the possibility that an adverse judgment could have a materially adverse effect on the business or operations of Ginkgo or Zymergen after the completion of the Merger;

 

   

the risk that the Merger may not be completed or may be delayed despite the parties’ efforts, including the possibility that conditions to the parties’ obligations to complete the Merger may not be satisfied, and the potential resulting disruptions to Ginkgo’s and Zymergen’s businesses or any reduction in Zymergen’s available cash resulting from any delays to complete the Merger;

 

   

the potential challenges in integrating the operations of Ginkgo and Zymergen and the risk that anticipated cost savings and operational efficiencies between the two companies, or other anticipated cost benefits of the Merger, might not be realized or might take longer to realize than expected;

 

   

the possibility that despite the retention efforts of Ginkgo and Zymergen, certain key employees of Zymergen or Ginkgo might not choose to remain with Ginkgo through or following the completion of the Merger;

 

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the possible diversion of management attention for an extended period of time during the pendency of the Merger and, following closing, the integration of the two companies;

 

   

the costs to be incurred in connection with the Merger, including those incurred regardless of whether the Merger is consummated; and

 

   

the risks of the type and nature described in the sections of this proxy statement/prospectus entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” beginning on pages 24 and 82, respectively.

The Ginkgo Board considered all of these factors as a whole and, on balance, concluded that the potential benefits of the Merger outweighed the risks and uncertainties of the Merger.

The foregoing discussion of the information and factors that the Ginkgo Board considered is not intended to be exhaustive, but rather is meant to include the material factors that the Ginkgo Board considered. The Ginkgo Board collectively reached the conclusion to approve the Merger Agreement and the Voting Agreements, and the transactions contemplated thereby (including the Merger), in light of the various factors described above and other factors that the members of the Ginkgo Board believed were appropriate. In view of the complexity and wide variety of factors, both positive and negative, that the Ginkgo Board considered in connection with its evaluation, the Ginkgo Board did not find it practical, and did not attempt, to quantify, rank or otherwise assign relative or specific weights or values to any of the factors it considered in reaching its decision and 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 Ginkgo Board. In considering the factors discussed above, individual directors may have given different weights to different factors.

The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement/prospectus entitled “Special Note Regarding Forward-Looking Statements” beginning on page 82.

Recommendation of the Zymergen Board and Zymergen’s Reasons for the Merger

After careful consideration, and after balancing the financial interests of Zymergen stockholders, those materially affected by Zymergen’s conduct, and Zymergen’s specific public benefit purpose, the Zymergen Board has unanimously: (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen, (ii) declared it advisable to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (iii) approved the execution and delivery by Zymergen of the Merger Agreement, the performance by Zymergen of its covenants and other obligations thereunder and the consummation of the transactions contemplated thereby, including the Merger, upon the terms and subject to the conditions set forth therein; (iv) agreed that the Merger, upon the terms and subject to the conditions contained in the Merger Agreement, is authorized and approved in accordance with the requirements of the DGCL; and (v) resolved to recommend that the stockholders of Zymergen adopt the Merger Agreement in accordance with the DGCL.    

The Zymergen Board unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement and (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Reasons for the Merger

In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, the Zymergen Board consulted with Zymergen’s management and its legal and financial advisors. In the course of

 

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making the determination that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair and in the best interests of Zymergen, the stockholders of Zymergen, those materially affected by Zymergen’s conduct, and the public benefit purpose of Zymergen and to recommend that stockholders adopt the Merger Agreement, the Zymergen Board considered numerous factors, including, among other things, those stated in the section captioned “—Background of the Merger” beginning on page 98 of this proxy statement/prospectus and the following material factors and benefits (not necessarily in order of relative importance) of the transactions contemplated by the Merger Agreement, including the Merger:

Aggregate Value and Composition of the Merger Consideration

 

   

the fact that the exchange ratio of 0.9179 represented an implied value per Zymergen Common Stock of $2.68 based on the closing price of Ginkgo Class A Common Stock as of July 22, 2022 (the trading day immediately prior to the date of the announcement of the Merger), which represented a premium value for Zymergen’s stockholders, including:

 

   

a premium of 34.0% to the closing price of Zymergen Common Stock on July 22, 2022 (the last trading day immediately prior to the date of the announcement of the Merger);

 

   

a premium of 70.5% to the volume weighted average price (the “VWAP”) of Zymergen Common Stock during the 30 calendar days prior to July 22, 2022; and

 

   

a premium of 73.5% to the VWAP of Zymergen Common Stock during the 60 calendar days prior to July 22, 2022;

 

   

the Zymergen Board’s belief that the value to be received by Zymergen stockholders under the Merger reflected a higher value than would be achieved under Zymergen’s standalone plan and higher than the offer received from Party A, the only other party that submitted an offer;

 

   

that the fixed Exchange Ratio provides certainty to Zymergen’s stockholders as to their pro forma ownership of approximately 5.25% of the combined company, on a fully diluted basis, following completion of the Merger while providing Zymergen stockholders the opportunity to benefit from any increase in the trading price of Ginkgo Class A Common Stock before the closing of the Merger;

 

   

that the stock consideration offers Zymergen’s stockholders the opportunity to participate in the potential value creation of the combined company (including any future appreciation in the value of Ginkgo Class A Common Stock), as well as any additional premium that may be realized in the event the combined company is sold to a third party in the future;

 

   

the Zymergen Board’s belief that the combined company has the ability to provide strong returns to stockholders over the long-term;

 

   

the support from each of the Voting Agreement Stockholders, three significant stockholders of Zymergen, in favor of the Merger; and

 

   

the fact that Zymergen stockholders will be able to either retain the Ginkgo Class A Common Stock to be received in the Merger or, given the expected liquidity of the combined company’s stock, at their option, dispose of that stock.

Sale Process

 

   

the comprehensive sale process undertaken by Zymergen with the assistance of Cowen through which 41 strategic parties were contacted regarding a potential acquisition of Zymergen;

 

   

the fact that eight parties (including Ginkgo and Party A) had been in active discussion with representatives of Cowen and/or Zymergen management as part of the process with respect to a potential acquisition of Zymergen;

 

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the fact that two parties (Ginkgo and Party A) submitted proposals as part of the strategic alternatives review process;

 

   

the fact that a parallel process was undertaken by Zymergen with the assistance of Cowen through which 59 financial parties were contacted regarding a possible carve-out transaction involving the financing and separation of the Zymergen automation business;

 

   

the fact that 22 financial parties received teaser materials with respect to a possible carve-out transaction involving the financing and separation of the automation business; and

 

   

the fact that Cowen discussed a PIPE with 10 potentially interested financial parties.

Impact on Those Materially Affected by Zymergen’s Conduct and Public Benefit Purpose Considerations

 

   

the fact that Zymergen would survive the Merger as a wholly owned subsidiary and a Delaware public benefit corporation with the same public benefit purpose as that of Zymergen prior to the Merger;

 

   

the fact that the Merger would potentially broaden the product mix and reach of Zymergen’s technology through Ginkgo’s platform;

 

   

the fact that Ginkgo values and empowers its employees by granting them Ginkgo Class B Common Stock that have ten times the voting power of Ginkgo Class A Common Stock;

 

   

the cultural alignment between Zymergen and Ginkgo, including a shared vision for using biology to change the way that physical materials impact the world;

 

   

Ginkgo’s stated intent to work with Zymergen on its retention plan and support the potential spin-outs of Zymergen’s advanced materials and drug discovery businesses; and

 

   

the fact that Zymergen stockholders would be receiving stock in Ginkgo, which is a company that has implemented ESG initiatives that are similar to those of Zymergen, including that Ginkgo’s charter permits the Ginkgo Board to consider the effects of corporate actions on various stakeholders in addition to its stockholders.

Synergies and Strategic Considerations

 

   

the Zymergen Board’s belief that the Merger will result in a leading synthetic biology company with enhanced scale and capabilities that will enable it to better address various execution risks and uncertainties and withstand industry challenges and macroeconomic risks;

 

   

the Zymergen Board’s belief that the combined company’s business will have an enhanced financial profile and be better positioned to withstand challenges facing the synthetic biology industry with a stronger balance sheet, expected greater free cash flow and enhanced liquidity as compared with Zymergen on a standalone basis, as well as the potential for improved access to capital markets afforded to a larger public company;

 

   

the Zymergen Board’s belief that the combined company will be able to achieve substantial synergies and be better positioned to meaningfully accelerate growth initiatives and pursue additional investment opportunities;

 

   

the Zymergen Board’s belief that Ginkgo’s vision aligns with Zymergen’s stated vision and goals regarding partnering with nature to design, develop, and manufacture high-performance products more cleanly and with less waste than traditional chemicals and materials companies;

 

   

the Zymergen Board’s belief that Ginkgo’s platform provides strong complementary technology and cultural fit contributing to a more robust business than on a standalone basis; and

 

   

the Zymergen Board’s belief that a transaction with Party A contained material risks and uncertainties due to, among other things, the regulatory scrutiny and clearances that would be expected for such

 

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transaction, the lack of adequate information provided by Party A to support its proposal, and asset valuations, and address post-closing integration, operations and financial concerns, and certain litigation and other risks involving Party A affiliates.

Standalone Considerations

 

   

material and adverse developments in Zymergen’s business that the Zymergen management believed would pose significant challenges to Zymergen’s ability to execute on its strategic plan, including, among other challenges:

 

   

emerging data on the total addressable market for foldable display applications, which indicated a smaller near-term market opportunity and a slower growth in such market demand than previously expected by Zymergen;

 

   

reassessments of customer demand, which indicated that prior forecasts by Zymergen’s commercial team had overestimated near-term demand; and

 

   

several key target customers encountered technical issues implementing Zymergen’s first product, Hyaline, into their manufacturing processes, which Zymergen subsequently discontinued.

 

   

the challenges generally presented by the rapidly evolving synthetic biology industry in which Zymergen competes were likely to remain present and persist following the COVID-19 pandemic;

 

   

the risk that Zymergen may need to raise an additional $800 million in net cash (consisting of $851.0 million in projected gross cash raised from equity offerings from 2022 to 2026, net of 6% in projected underwriting discounts and commissions) from projected equity financings of Zymergen (the “Projected Equity Financings”) in order to execute on its strategic plan, which would result in substantial dilution to Zymergen’s stockholders;

 

   

the going concern risk that Zymergen faced as a standalone company with respect to its ability to obtain additional financing, including the Projected Equity Financings, on favorable terms;

 

   

the fact that Zymergen commenced a search to identify a Chief Executive Officer, and that it is uncertain whether a qualified individual able to successfully oversee and execute on Zymergen’s standalone plan would be identified and/or hired in the near term or ever;

 

   

the potential disruption to Zymergen’s ability to execute on its strategic plan following the reduction in its workforce;

 

   

that biopharmaceutical drug development is inherently uncertain, and that it is possible that none of the leads discovered using Zymergen’s platform that are further developed will receive marketing approval or become viable commercial products on a timely basis, or at all;

 

   

that adverse impacts of global economic or political conditions may affect Zymergen’s business; and

 

   

that the rapidly changing technology and extensive competition in the synthetic biology industry could make the products Zymergen is developing and producing obsolete or non-competitive.

Key Aspects of the Transaction

 

   

the opinion of Cowen that was received by the Zymergen Board that, as of July 24, 2022, based upon and subject to the various assumptions, qualifications and limitations set forth therein, the Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger Agreement was fair, from a financial point of view, to the holders of Zymergen Common Stock (other than holders of certain excluded shares specified in the Merger Agreement), as further described under the heading “—Opinion of Financial Advisor to Zymergen” beginning on page 121 of this proxy statement/prospectus;

 

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the likelihood that the Merger will be consummated and anticipated timing of closing;

 

   

the fact that the Merger Agreement was negotiated at arm’s length between Zymergen and Ginkgo, with the assistance of their respective advisors and supported by business and legal diligence review;

 

   

consideration of other terms of the Merger Agreement, as more fully described in the section of this proxy statement/prospectus captioned “The Merger Agreement” beginning on page 140 and the course of the negotiations of such terms, which terms included (not in any relative order of importance):

 

   

the ability of Zymergen, under certain circumstances, to provide information to and to engage in discussions or negotiations with a third party that makes an unsolicited acquisition proposal, as further described under “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation” beginning on page 146 of this proxy statement/prospectus;

 

   

the ability of Zymergen, in certain circumstances, to terminate the Merger Agreement to enter into a Superior Proposal if the Zymergen Board determines in good faith that the failure to take such action would be reasonably likely to constitute a breach of its fiduciary duties under applicable law. Termination of the Merger Agreement to enter into an alternative acquisition agreement with respect to a Superior Proposal is subject to Zymergen’s payment to Ginkgo of the Zymergen Termination Fee of $10,000,000, which the Zymergen Board believes is reasonable in light of the circumstances and not likely to deter any potential interested party from making a competing acquisition proposal;

 

   

the ability of the Zymergen Board, in certain circumstances, to change its recommendation to Zymergen’s stockholders regarding the Merger (for more information see “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation”);

 

   

the ability of Zymergen, if Ginkgo breaches the Merger Agreement or fails to complete the Merger when required to do so, to seek specific performance or monetary damages, subject to the terms and conditions in the Merger Agreement;

 

   

the Ginkgo Termination Fee of $10,000,000 if the Merger Agreement is validly terminated by Ginkgo or Zymergen due to a failure to obtain requisite regulatory approvals or in the event that a law or order restrains, enjoins or otherwise prohibits the Merger (solely to the extent arising from or relating to antitrust laws) and, at the time of such termination, (1) all other closing conditions of Ginkgo and Merger Sub have been satisfied or waived and (2) Zymergen’s action or failure to act has not been the primary cause of, or primarily resulted in, failure of closing conditions related to receipt of regulatory approvals to be satisfied; and

 

   

consideration of the terms of the Voting Agreements, which will terminate upon certain circumstances, including, among other things, (1) upon termination of the Merger Agreement, (2) the outside date under the Merger Agreement or (3) any change to the material terms of the Merger Agreement that reduces the consideration payable or changes the form of consideration to be received by stockholders or modifies the closing conditions in the Merger Agreement in a manner adverse to the interests of Zymergen stockholders.

The Zymergen Board also considered various risks and other countervailing factors related to entering into the Merger Agreement, including, among other things, the following (not necessarily in order of relative importance):

 

   

that the fixed exchange ratio will not be adjusted to compensate for changes in the price of Ginkgo prior to the consummation of the Merger, and the terms of the Merger Agreement do not include termination rights triggered by a decrease in the value of Ginkgo shares relative to the value of Zymergen shares (although the Zymergen Board determined that the exchange ratio was appropriate and the risks acceptable in view of the relative intrinsic values and financial performance of Zymergen and Ginkgo);

 

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the amount of time it could take to complete the Merger, including, among other things, the fact that completion of the Merger depends on factors outside of Zymergen’s control, and that there can be no assurance that the conditions to the Merger will be satisfied even if the Merger Agreement is approved by Zymergen’s stockholders;

 

   

the provision with respect to Ginkgo’s efforts to obtain regulatory clearance, in which Ginkgo has no obligation under the Merger Agreement to: offer, negotiate, commit to and effect, by consent decree, hold separate order or otherwise, (1) the sale, divestiture, license or other disposition of any equity or voting interest, assets (whether tangible or intangible), rights, properties, products or businesses of Ginkgo and Merger Sub, on the one hand, and the Zymergen and its subsidiaries, on the other hand or (2) any other restrictions on the activities of Ginkgo and Merger Sub or Zymergen and its subsidiaries;

 

   

the possibility that the Merger might not be consummated and that if the Merger is not consummated, (1) the price of Zymergen shares would likely decrease since the current market price may reflect a market assumption that the Merger will be consummated, (2) Zymergen, in certain circumstances, may be required to pay Ginkgo the Zymergen Termination Fee of $10,000,000, (3) Zymergen may experience difficulties in obtaining financing from changed perceptions regarding Zymergen’s competitive position, management, liquidity or other aspects of its business, (4) Zymergen may be unable to find a partner willing to engage in a similar transaction on terms as favorable as those set forth in Zymergen’s agreements with Ginkgo, (5) Zymergen stockholders and those materially affected by Zymergen’s conduct would not realize the anticipated benefits of the Merger and (6) the anticipated positive impact of the Merger on Zymergen’s public benefit purpose would not be realized;

 

   

the terms of Merger Agreement that restrict Zymergen’s ability to solicit alternative acquisition proposals from third parties and to provide confidential due diligence information to, or engage in discussions with, a third party interested in pursuing an alternative acquisition proposal, as further discussed under “The Merger Agreement—No Solicitation of Acquisition Proposals and Change of Recommendation” beginning on page 146 of this proxy statement/prospectus;

 

   

the fact that Zymergen has incurred and will continue to incur significant transaction costs and expenses in connection with the Merger, regardless of whether consummated and, if the Merger is not consummated, Zymergen will be required to pay its own expenses associated with the Merger and the fact that the Zymergen Board, senior management and other employees will have expended significant time and effort and will have experienced significant distractions from their work during the pendency of the Merger;

 

   

the potential for diversion of management attention and employee attrition;

 

   

the possible effects of the public announcement on, including, among other things, customers and business relationships, the price of Zymergen Common Stock and Zymergen’s ability to attract and retain key personnel during the pendency of the Merger;

 

   

the risk of litigation in connection with the Merger, and the fact that litigation in connection with transactions such as the transactions contemplated by the Merger Agreement is common and potentially costly;

 

   

the fact that completion of the Merger would require governmental and regulatory consents, approvals and clearances and the satisfaction of certain other closing conditions, including that the Zymergen stockholder approval has been obtained, that there is no order or legal restraint preventing the consummation of the Merger and that (1) Zymergen has not incurred or otherwise become liable for additional costs, expenses or liabilities with respect to its leased real property not contemplated by its real estate plan provided to Ginkgo prior to the execution of the Merger Agreement and (2) certain specified legal proceedings are not reasonably expected to result in future money damages payable by Zymergen or its subsidiaries (in excess of any applicable insurance deductible and coverage amounts), where, the aggregate of clauses (1) and (2) exceed $25,000,000, which are not entirely within Zymergen’s control;

 

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the restrictions on the conduct of Zymergen’s business prior to the consummation of the Merger and the requirement that Zymergen conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Zymergen from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Zymergen might have pursued, as further discussed under “The Merger Agreement—Conduct of Business Pending the Merger” beginning on page 154 of this proxy statement/prospectus;

 

   

the difficulty and costs inherent in integrating diverse businesses and the risk that the cost savings, synergies and other benefits expected to be obtained as a result of the Merger might not be fully or timely realized;

 

   

the fact that Ginkgo is subject to outstanding legal proceedings with respect to securities matters and related inquiries, although such matters appear not to be material as stated by Ginkgo in its SEC filings; and

 

   

the risks of the type and nature described under the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” beginning on pages 24 and 82, respectively, of this proxy statement/prospectus.

The Zymergen Board considered all of these factors and concluded as a whole that the uncertainties, risks and potentially negative factors relevant to the Merger were outweighed by the potential benefits that it expected the stockholders of Zymergen, those materially affected by Zymergen’s conduct and the public benefit purpose of Zymergen as a result of the Merger.

In considering the recommendations of the Zymergen Board, you should be aware that certain directors and officers of Zymergen have interests in the Merger that are in addition to, or different from, any interests they might have as stockholders. For more information, see “—Interests of Zymergen’s Directors and Executive Officers in the Merger” beginning on page 131 of this proxy statement/prospectus.

This discussion of the information and factors considered by the Zymergen Board includes the principal positive and negative factors considered by the Zymergen Board, but is not intended to be exhaustive and may not include all of the factors considered by the Zymergen Board. In view of the wide variety of factors considered by the Zymergen Board in connection with its evaluation of the Merger and the complexity of these matters, the Zymergen Board did not find it practicable to, and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the Merger and to make its recommendations to Zymergen’s stockholders. Rather, the Zymergen Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered. In addition, individual members of the Zymergen Board may have given differing weights to different factors. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement/prospectus captioned “Special Note Regarding Forward-Looking Statements” beginning on page 82.

Opinion of Financial Advisor to Zymergen

Pursuant to an engagement letter dated May 6, 2022, Zymergen retained Cowen to act as its financial advisor in connection with certain potential transactions, including a possible sale of or other business combination involving Zymergen, and to render an opinion to the Zymergen Board as to the fairness, from a financial point of view, to the holders of Zymergen Common Stock, other than holders of Owned Company Shares, of the Exchange Ratio to be received by the stockholders of Zymergen pursuant to the terms of the Merger Agreement.

On July 23, 2022, Cowen delivered certain of its written analyses and its oral opinion to the Zymergen Board, subsequently confirmed in writing as of July 24, 2022, to the effect that, based upon and subject to the

 

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various assumptions, qualifications and limitations set forth therein, as of July 24, 2022, the Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger was fair, from a financial point of view, to the stockholders of Zymergen, other than holders of Owned Company Shares.

The full text of the written opinion of Cowen, dated July 24, 2022, is attached as Appendix E and is incorporated by reference. Holders of Zymergen Common Stock are urged to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Cowen. The summary of the written opinion of Cowen set forth herein is qualified in its entirety by reference to the full text of such opinion. Cowen’s analyses and opinion were prepared for and addressed to the Zymergen Board and are directed only to the fairness, from a financial point of view, of the Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger, other than holders of Owned Company Shares, and do not constitute an opinion as to the merits of the Merger or a recommendation to any stockholder or any other person as to how to vote on the Merger. The Exchange Ratio to be received by the holders of Zymergen Common Stock in the Merger was determined through negotiations between Zymergen and Ginkgo and not pursuant to any recommendation of Cowen.

In arriving at its opinion, Cowen reviewed and considered such financial and other matters as it deemed relevant, including, among other things:

 

   

the Merger Agreement;

 

   

certain publicly available financial and other information for Zymergen, and certain other relevant financial and operating data furnished to Cowen by management of Zymergen;

 

   

certain publicly available financial and other information for Ginkgo;

 

   

certain internal financial analyses, financial forecasts, reports and other information concerning Zymergen prepared by the management of Zymergen (referred to in this section as the “Zymergen Forecasts”), as described under “—Certain Financial Information” below;

 

   

consensus estimates and financial projections in Wall Street analyst reports (together, referred to in this section as the “Wall Street Projections”) for each of Zymergen and Ginkgo;

 

   

discussions Cowen had with certain members of the management of Zymergen concerning the historical and current business operations, financial conditions and prospects of Zymergen and such other matters Cowen deemed relevant;

 

   

certain operating results of Zymergen as compared to the operating results of certain publicly traded companies Cowen deemed relevant;

 

   

certain financial and stock market information for Zymergen and Ginkgo as compared with similar information for certain publicly traded companies Cowen deemed relevant;

 

   

certain financial terms of the Merger as compared to the financial terms of certain selected business combinations Cowen deemed relevant; and