Fold Holdings, Inc. - Form 8-K Summary
Business Context and Reporting Period
Company: Fold Holdings, Inc.
Filing Date: March 6, 2025 (Report Date: March 12, 2025)
Event: Entry into a Material Definitive Agreement (Convertible Note and Bitcoin Acquisition).
On March 6, 2025, Fold Holdings, Inc. entered into a Securities Purchase Agreement with SATS Credit Fund LP (the "Investor"). The transaction involves the issuance of a convertible note and the acquisition of 500 bitcoin as collateral. The Investor is managed by Ten31, LLC, an affiliate of Fold's Chairman, Jonathan Kirkwood, who recused himself from the board approval.
Key Financial Metrics and Transaction Terms
- Principal Amount: Approximately $46.3 million.
- Collateral: 500 bitcoin contributed by the Investor (sole recourse).
- Interest Rate: 7.0% per annum, payable quarterly in Common Stock valued at $12.50 per share.
- Conversion Price: $12.50 per share.
- Maximum Conversion Shares: Approximately 3.7 million shares.
- Maturity Date: March 6, 2030.
- Additional Consideration Paid by Fold:
- Warrant to purchase 925,590 shares at $15.00 per share (expires March 12, 2030).
- 750,000 shares of Common Stock issued at closing.
- 25 bitcoin issued in lieu of the first 12 months of interest payments.
- Cash Flow Impact: No cash payments are contemplated under the Note; all payments are made via Common Stock or Bitcoin.
Material Changes and Conversion Mechanics
The Note includes automatic conversion triggers based on the Company's share price ("Subject Share Price") over a 20-day period within 30 consecutive trading days. If thresholds are met, portions of the Note convert automatically, releasing proportional amounts of the 500 bitcoin collateral to Fold:
- $15.00 Threshold: ~$4.6M principal converts (~370k shares).
- $20.00 Threshold: ~$4.6M principal converts (~370k shares).
- $25.00 Threshold: ~$4.6M principal converts (~740k shares).
- $30.00 Threshold: ~$9.3M principal converts (~740k shares).
- $35.00 Threshold: ~$9.3M principal converts (~740k shares).
- $40.00 Threshold: ~$9.3M principal converts (~740k shares); full release of 500 bitcoin.
If thresholds are not met and the Investor does not elect to convert, the Company must repay the principal on the Maturity Date by transferring bitcoin equal to the outstanding principal divided by the Bitcoin Reference Price ($92,559).
Guidance, Risks, and Contingencies
- Related Party Transaction: The deal involves an affiliate of the Chairman. The Audit Committee and Board approved the transaction with the Chairman recused.
- Default Provisions: Events of default include failure to maintain stock listing, insolvency, bankruptcy, or failure to pay interest. Upon default, the Investor may require redemption by returning unconverted bitcoin.
- Registration Rights: The Company agreed to provide shelf and piggyback registration rights for Conversion Shares and Warrant Shares.
- Unregistered Securities: The securities are being sold under Section 4(a)(2) of the Securities Act and are not registered.
- Bitcoin Volatility Risk: Repayment obligations are tied to the value of bitcoin, creating potential volatility in the Company's balance sheet obligations.
Investor Verification Checklist
- Verify the current market price of bitcoin relative to the $92,559 reference price to assess the potential share dilution if repayment is required in bitcoin.
- Confirm the total potential dilution from the 3.7 million conversion shares, 925,590 warrant shares, and 750,000 closing shares.
- Review the full text of the Securities Purchase Agreement (Exhibit 10.1) for specific definitions of "Subject Share Price" and conversion mechanics.
- Assess the impact of the 7.0% interest payable in stock on future earnings per share (EPS) and cash flow.
- Monitor the Company's ability to maintain its Nasdaq listing to avoid triggering default provisions.