Stryve Foods issues convertible preferred stock in $9.4 million deal

Stryve Foods, Inc. (NASDAQ:SNAX), a food and kindred products manufacturer with a market capitalization of just $2.78 million, has entered into a significant financial agreement, issuing a new series of convertible preferred stock and extending the maturity of a related party promissory note, according to a recent SEC filing. InvestingPro analysis indicates the company operates with a significant debt burden and faces challenges with cash burn, earning a "WEAK" overall financial health rating.

On January 30, 2025, the company executed a Securities Purchase Agreement, selling 877,878 shares of Series A-1 Convertible Preferred Stock at a total value of $9.4 million. This amount was covered by converting existing debts, including $3.0 million from related parties, with Chief Executive Officer Christopher Boever contributing $2.7 million. The transaction comes as the company grapples with a total debt of $28.11 million and a concerning current ratio of 0.38, indicating potential liquidity challenges.

The new preferred stock is convertible into Class A common stock at $0.7599 per share, equating to approximately 12,375,317 common shares. Conversion is subject to standard anti-dilution provisions. The preferred stock ranks above common stock for dividends and asset distribution in case of liquidation, with an initial stated value of $10.7122 per share and an annual dividend rate of 12%.

Convertible preferred stockholders are entitled to a liquidation preference equal to the greater of their stated value plus unpaid dividends or the amount they would receive upon conversion to common stock before liquidation. The stock can be converted six months post-issue and is subject to a 9.99% (or 19.99% for certain holders) ownership cap to avoid exceeding the company’s common stock ownership threshold.

In the event of a Sale Transaction (JO:TCPJ), holders can opt for cash equivalent to the greater of their stated value plus dividends or the conversion value into common stock. Two years post-issue, the company may redeem the preferred stock at 102% of its stated value plus unpaid dividends.

Additionally, the company has amended the terms of a promissory note with a related party, extending the maturity date from December 23, 2024, to December 31, 2025, for a principal amount of $761,422.

The transactions are part of Stryve Foods’ strategic financial maneuvers to manage debt and equity, providing the company with capital while offering investors potential equity upside. The company reported a robust growth in its Q3 results, with a 36.4% rise in net sales to $5.7 million and a substantial increase in gross margin from 13.3% to 21.7% year-over-year. Despite the positive financial performance, the company acknowledged the need for additional capital to support future growth.

In a recent Special Meeting of Stockholders, Stryve Foods received overwhelming support for the issuance of Class A common stock upon the exercise of the November Warrants and the Amended Warrants. This approval allows the company to proceed with the issuance of shares, aligning its financial strategies with shareholder interests and market opportunities.

The company also received an extension from the Nasdaq Hearings Panel to meet the exchange’s minimum stockholders’ equity requirement. However, Stryve Foods still faces the risk of delisting from the Nasdaq due to its share price falling below the required minimum. The company is currently considering various strategies to address this non-compliance.

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