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Megalith Financial Amends Terms. Guess What They Included…


Megalith Financial Amends Terms. Guess What They Included…

Aug 22, 2018 INTEL by Kristi Marvin

Megalith Financial Acquisition Corp. filed an amended S-1 this afternoon with a few changes to the terms and its very positive.

First, Megalith now has 21 months to find an acquisition, down three months from the previous 24 months.

Second, and most important, they’ve included the Crescent Funding term that adjusts the warrant strike and redemption trigger in the event of the issuance of additional securities in connection with a business combination closing. Plus, Megalith has thrown in some additional language to clarify the terms.  The term states:

“…. if

(x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.50 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors),…

(y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination, and…

(z) the volume weighted average trading price of our Class A common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.50 per share,…

the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value, and the $24.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 240% of the Market Value.

So, as an example, if Megalith does a PIPE at business combination, but it’s done at effectively $9.51 or above and the total proceeds of the PIPE are less than $90 million (assuming Trust is $150 million at the time), plus the share price is trading at $9.50 or above on a VWAP basis for 20 days from the day before closing, there is no adjustment to the warrants.

However, if i’m interpreting the language correctly, if Megalith does a $100 million PIPE at $9.40, but the share is trading at $9.60.  Again, no adjustment.  Which is completely fair. If the share price is performing, Megalith shouldn’t have to adjust the warrants.

This is a big positive for investors and regardless of whether investors demanded it post Avista announcement, I think it’s a show of strength and confidence that Megalith was willing to include it.

Since Crescent never even got to IPO, perhaps we should rename this the “Megalith Term”.