Capstone draws $3.25 million from convertible note for acquisition plans

NEW YORK - Capstone Holding Corp. (NASDAQ:CAPS), currently valued at $7 million in market capitalization, has drawn $3.25 million from its existing convertible note facility to support its planned acquisition of a multi-location stone distributor, the company announced Monday.

The building products distributor said the funds will help finance its recently signed letter of intent to acquire a stone distribution business with approximately $15 million in annual revenue - representing a significant addition to Capstone’s current trailing twelve-month revenue of $43.38 million. The transaction is expected to be immediately accretive to revenue and EBITDA, according to the press release statement. InvestingPro data shows the company currently maintains a weak financial health score, with detailed metrics and analysis available to subscribers.

The $3.25 million draw comes from Capstone’s existing $10 million convertible note facility. Terms include quarterly cash amortization beginning after 90 days and a $1.10 fixed conversion price. The facility carries an original issue discount of 8.34%, a 7.0% annual interest rate, and matures on July 29, 2026.

"Our investors continue to validate Capstone’s disciplined M&A strategy, growth trajectory, and proven track record of execution," said Matthew Lipman, CEO of Capstone Holding Corp.

The company stated this funding allows it to pursue its acquisition strategy while maintaining balance sheet flexibility. Capstone reaffirmed its goal of reaching a $100 million revenue run-rate target in the first quarter of 2026.

Joseph Gunnar & Co., LLC acted as the exclusive placement agent for the offering. Complete details of the transaction will be available in the company’s forthcoming 8-K filing, according to the announcement.

Capstone Holding Corp. operates primarily through its Instone subsidiary, which serves 31 U.S. states with stone veneer, hardscape materials, and modular masonry systems.

In other recent news, Capstone Holding Corp. has reaffirmed its commitment to an acquisition-focused growth strategy, citing industry trends as validation. The company has completed several acquisitions, including HHT’s stone business, Heller’s stone, Northeast Masonry, and Carolina Stone, which have expanded its distribution network to 31 states. Capstone has also signed a letter of intent to acquire a multi-location stone distribution business, which is expected to add $15 million in annual revenue. This acquisition is anticipated to close within 45 days, pending a definitive agreement. Additionally, Capstone has exchanged $1.9 million of debt for non-convertible preferred equity, aiming to reduce its 2026 interest expense by over $170,000. The company is targeting a $100 million annualized revenue run rate by the first quarter of 2026. Following its recent acquisition of Carolina Stone, which contributed $11 million in revenue, Capstone is actively exploring further acquisition opportunities. The company emphasizes a disciplined approach to acquisitions, focusing on deals that align with its strategic goals.

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