Business Context and Reporting Period
This Form 8-K Current Report was filed by Wheeler Real Estate Investment Trust, Inc. (WHLR) on December 6, 2023, covering events occurring on December 4 and 5, 2023. The filing details the third monthly redemption of Series D Cumulative Convertible Preferred Stock, the issuance of unregistered common stock to settle these redemptions, and a material modification to the conversion price of the Company's 7.00% Subordinated Convertible Notes due 2031.
Key Financial Metrics and Capital Structure
- Redemption Settlement: The Company settled approximately $14.1 million in redemption obligations for the December 2023 cycle by issuing 36,194,825 shares of Common Stock.
- Redemption Price: The redemption price was approximately $38.02 per share of Series D Preferred Stock (comprising $25.00 principal plus accrued dividends).
- Stock Issuance Volume: The issuance was based on a volume-weighted average closing price of approximately $0.39 per share of Common Stock over the ten trading days preceding the redemption date.
- Cumulative Impact: To date, the Company has issued 52,788,687 shares of Common Stock to settle approximately $32.7 million in aggregate redemption prices across 175 redemption requests.
- Outstanding Shares (as of Dec 6, 2023): 53,769,787 shares of Common Stock and 2,515,876 shares of Series D Preferred Stock.
- Debt Conversion Adjustment: The conversion price for the 7.00% Subordinated Convertible Notes due 2031 was adjusted from approximately $0.46 to $0.21 per share (a 45% discount to the $0.39 stock price), resulting in approximately 116.46 shares of Common Stock for each $25.00 of principal.
Material Changes Versus Prior Period
The primary material change is the significant dilution of the Common Stock due to the settlement of Series D Preferred Stock redemptions in kind. The Company issued 36.2 million shares in December alone, increasing the total Common Stock outstanding to approximately 53.8 million shares. Additionally, the conversion price for the 2031 Notes was materially reduced to $0.21, significantly increasing the potential dilution from note conversions compared to the prior conversion price of $0.46.
Guidance, Outlook, Risks, and Unusual Items
- Unregistered Stock Issuance: Due to significant declines and fluctuations in the Common Stock price and unpredictable redemption volumes, the Company lacks sufficient registered shares to meet monthly redemption requests. Consequently, the Company plans to continue issuing unregistered Common Stock until a sufficient registration statement is filed and effective.
- Excepted Holder Agreement: On December 5, 2023, the Company entered into an agreement with Stilwell Activist Investments and related entities (collectively, the "Investors"). The Board created an "Excepted Holder Limit" allowing these Investors to hold up to 55% of Capital Stock and 86% of Common Stock, exempting them from the standard 9.8% ownership limit in the Charter.
- Investor Commitment: In consideration for the ownership limit exemption, the Investors agreed to a one-year letter agreement not to convert their Notes into Common Stock if such conversion would result in them beneficially owning 50% or more of the Company's total voting power.
- Future Redemptions: The next monthly Holder Redemption Date is scheduled for January 5, 2024, with a request deadline of December 25, 2023.
- Risk Factors: The filing highlights risks related to the inability to plan for sufficient registered shares, ongoing stock price volatility, and the potential for further dilution from both preferred stock redemptions and the adjusted note conversion price.
Important Facts for Investor Verification
- Verify the exact number of unregistered shares issued in the December 2023 cycle (36,194,825) and the timeline for their registration.
- Confirm the impact of the new $0.21 conversion price on the 2031 Notes regarding potential future dilution.
- Review the terms of the Excepted Holder Agreement to understand the specific voting rights and ownership thresholds granted to the Stilwell entities.
- Monitor the remaining volume of Series D Preferred Stock (2,515,876 shares) and the Company's ability to fund future redemptions without further dilution.
- Check for any subsequent filings regarding the registration of the unregistered shares issued in December.