SCHEDULE 13D: Avenue Capital Group Entities Disclose Significant Stake in Eyenovia, Holding Over 67% Through Convertible Debt

A group of investment funds and entities managed by Avenue Capital Group, including Marc Lasry, have disclosed a combined beneficial ownership of 67.9% in Eyenovia, Inc., primarily through convertible debt.

Summary

• A group of entities associated with Avenue Capital Group, including Avenue Venture Opportunities Fund, L.P., Avenue Venture Opportunities Fund II, L.P., and their managing entities, along with Marc Lasry, have filed a Schedule 13D disclosing their beneficial ownership in Eyenovia, Inc.
• The reporting persons collectively beneficially own 5,982,998 shares of Eyenovia's common stock, representing 67.9% of the outstanding shares as of April 11, 2025.
• This ownership includes 30,618 direct shares (12,247 from Fund and 18,371 from Fund II) and 5,952,380 shares issuable upon conversion of a $10.0 million loan.
• The loan, initially for $10.0 million, was provided by Fund ($4.0 million) and Fund II ($6.0 million) under a Loan and Security Agreement dated November 22, 2022.
• As part of the initial agreement, lenders received an equity grant of 547,807 shares, which was adjusted to 6,847 shares after a 1-for-80 reverse stock split on January 31, 2025.
• Initially, lenders had the right to convert up to $5.0 million of principal at a conversion price of $2.148 per share.
• A Second Amendment to the Agreement on February 21, 2025, granted the lenders the right to convert up to the full $10.0 million principal at a reduced conversion price of $1.68 per share, effective April 1, 2025.
• The reporting persons intend to review their investment and may take future actions, including disposing of shares or acquiring more through debt conversion or private transactions.

Sentiment

Score: 7

Explanation: The filing indicates a significant and strategic investment by Avenue Capital Group in Eyenovia, primarily through convertible debt. The commitment of $10 million and the willingness to adjust conversion terms suggest a strong belief in the company's long-term prospects by a sophisticated investor. However, the potential for substantial dilution upon conversion could be a concern for existing shareholders.

Positives

• Avenue Capital Group, a significant investment firm, has a substantial and long-term investment in Eyenovia, indicating confidence.
• The ability to convert a $10.0 million loan into common stock at a fixed price of $1.68 per share provides a clear path to equity ownership and potential upside for the lenders.
• The conversion price of $1.68 is lower than the initial conversion price of $2.148, which is favorable for the lenders.

Negatives

• The significant beneficial ownership (67.9%) by a single group of investors, primarily through convertible debt, could lead to substantial dilution for existing shareholders if the debt is fully converted.
• The reduction in the conversion price from $2.148 to $1.68 per share suggests a lower valuation for the conversion, which could be perceived negatively by existing shareholders.

Risks

• Dilution Risk: The potential conversion of $10.0 million in debt into 5,952,380 shares at $1.68 per share could significantly dilute the ownership percentage of existing shareholders.
• Market Overhang: The reporting persons' stated intention to potentially dispose of some or all shares in the future could create market overhang, potentially impacting the stock price.
• Control Risk: With 67.9% beneficial ownership, the Avenue Capital Group entities could exert significant influence over Eyenovia's corporate decisions.

Future Outlook

The Reporting Persons intend to continuously review their investment in Eyenovia based on various factors, including the Issuer's business, financial condition, results of operations and prospects, general economic and industry conditions, the securities markets in general and those for the common stock in particular, as well as other developments and other investment opportunities. They may take future actions such as disposing of some or all shares or acquiring additional shares through debt conversion or privately negotiated transactions.

Industry Context

NA

Legal Proceedings

• No Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) in the last five years.
• No Reporting Person has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction nor been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws within the last five years.

Related Party Transactions

• On November 22, 2022, Fund and Fund II (Reporting Persons) entered into a Loan and Security Agreement with Eyenovia, Inc. (Issuer) for an initial Growth Capital Loan of $10,000,000.
• As consideration for the commitment, lenders received an equity grant of 547,807 shares (adjusted to 6,847 shares post-split).
• On February 21, 2025, a Second Amendment to the Agreement was executed, allowing conversion of up to $10,000,000 principal at $1.68 per share, effective April 1, 2025.

Stakeholder Impact

• Shareholders: Potential for significant dilution if the convertible debt is fully converted, as the reporting persons could hold up to 67.9% of the outstanding shares. The large stake also means a single group could exert significant influence over company decisions.
• Creditors: The reporting persons are also creditors through the $10 million loan, giving them a dual interest as both debt and potential equity holders.

Next Steps

• Reporting Persons will continue to review their investment in Eyenovia.
• Reporting Persons may dispose of some or all of their shares.
• Reporting Persons may acquire additional shares through conversion of debt or privately negotiated transactions.

Key Dates

Keywords

Eyenovia, Avenue Capital Group, Schedule 13D, beneficial ownership, convertible debt, common stock, investment, dilution, SEC filing, corporate governance, venture debt, Marc Lasry