S-1/A: Hyperscale Data Seeks to Resell Preferred Stock: Files Amendment No. 3 to Registration Statement

Hyperscale Data, Inc. files an amendment to its registration statement for the potential resale of up to 1,500,000 shares of its 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock by Orion Equity Partners LLC.

Summary

• Hyperscale Data, Inc. (formerly Ault Alliance, Inc.) has filed Amendment No. 3 to its Form S-1 registration statement.
• The filing pertains to the offer and resale of up to 1,500,000 shares of its 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock by Orion Equity Partners LLC.
• Orion has committed to purchase up to $37.5 million of Series D Preferred Stock from the company.
• Hyperscale Data will not receive any proceeds from the resale of shares by Orion, but may receive up to $37.5 million from sales to Orion.
• The company intends to use any proceeds from the sale of Series D Preferred Stock to repay debt under the 2024 Credit Agreement, and thereafter for working capital purposes.
• The Series D Preferred Stock trades on the NYSE American under the symbol GPUS PD, with the last reported sales price on January 8, 2025, at $24.05 per share.
• The company is classified as a smaller reporting company and is subject to reduced public company reporting requirements.
• Investing in the Series D Preferred Stock is considered highly speculative and involves a high degree of risk.

Sentiment

Score: 5

Explanation: The document is neutral in tone, primarily focusing on the terms and conditions of the proposed offering. While it acknowledges the speculative nature of the investment, it does not express overly positive or negative views.

Positives

• The company has access to a committed equity financing facility of up to $37.5 million with Orion Equity Partners LLC.
• The company has timely made every monthly dividend payment since the first dividend record date of June 30, 2022, in which we have paid an aggregate of $2,497,443 in dividends to the holders of Series D Preferred Stock.

Negatives

• Investing in the Series D Preferred Stock is considered highly speculative and involves a high degree of risk.
• The company will not receive any proceeds from the resale of shares by the Selling Stockholder.
• The Selling Stockholder will receive a 5.5% discount to the market price of the Shares it is required to purchase under the Purchase Agreement, plus the reimbursement of legal costs and the costs of engagement of $115,000 as a qualified independent underwriter in compliance with FINRA Rule 5121, and $700,000 in original interest discounts under the notes issued to affiliate entities of Orion under a 2024 Credit Agreement.

Risks

• The company may not have access to the full amount available under the Purchase Agreement with the Selling Stockholder.
• Sales of the Series D Preferred Stock to the Selling Stockholder could result in substantial dilution to the interests of other holders of the Series D Preferred Stock.
• The Selling Stockholder will pay less than the then-prevailing market price for the Series D Preferred Stock, which could cause the price of the Series D Preferred Stock to decline.
• The company's management team may have broad discretion over the use of the net proceeds from the sale of shares of Series D Preferred Stock to the Selling Stockholder, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
• The Series D Preferred Stock ranks junior to all of the company's indebtedness and other liabilities.
• Market interest rates may materially and adversely affect the value of the Series D Preferred Stock.
• The company may not be able to pay dividends on the Series D Preferred Stock if it has insufficient cash in the future to make dividend payments.
• Holders of the Series D Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to qualified dividend income.
• The Series D Preferred Stock has not been rated by an independent rating agency.
• The company may redeem the Series D Preferred Stock, which may have an adverse economic effect on investors.
• The market price of the company's Series D Preferred Stock could be substantially affected by various factors.
• The market for the company's Series D Preferred Stock may not provide investors with adequate liquidity.
• As a holder of Series D Preferred Stock, you will have extremely limited voting rights.
• The Series D Preferred Stock is not convertible into the company's common stock except under certain limited circumstances, and investors will not realize a corresponding upside if the price of the company's common stock increases.
• If the company does not continue to satisfy the NYSE American continued listing requirements, its Series D Preferred Stock could be delisted from NYSE American.

Future Outlook

The company anticipates returning value to stockholders after satisfying its debt obligations and working capital needs and will consider initiatives including, among others: public offerings, the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize stockholder value, such as activist trading.

Industry Context

The document highlights Hyperscale Data's involvement in data centers, Bitcoin mining, and AI, reflecting the growing convergence of these sectors. The company's transition towards high-performance computing (HPC) and AI is in line with the increasing demand for data centers that can support these computationally intensive applications.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• However, it mentions the company's focus on low-cost, renewable power for Bitcoin mining, which is a common strategy among miners to reduce operating expenses.
• The document also mentions the company's use of Gemini Trust Company, LLC as a custodian for its Bitcoin holdings, which is a common practice among companies in the crypto asset industry to ensure the security of their assets.

Related Party Transactions

• The document mentions that Selling Stockholder may be deemed to be an affiliate of Spartan Capital Securities, LLC, a FINRA member by virtue of the fact that Selling Stockholder is 50% beneficially owned and controlled by each of John Lowry, the 100% beneficial owner of Spartan, and William Coons, an associated person of Spartan.
• The document mentions that on June 4, 2024, the company entered into a Loan Agreement with OREE Lending Company, LLC and Helios Funds LLC, as lenders, and that each Lender is a 50% member of (and thus affiliate of) Orion.

Stakeholder Impact

• Existing shareholders of Series D Preferred Stock will experience dilution of their economic and voting interests.
• The potential resale of a substantial number of shares could adversely affect the market price of the Series D Preferred Stock.
• The company's ability to execute its business strategy depends on its ability to access capital, including through this offering.

Next Steps

• The company needs the SEC to declare the registration statement effective.
• The company may then, at its discretion, direct Orion Equity Partners LLC to purchase shares of Series D Preferred Stock, subject to certain conditions.
• The company will use any proceeds from the sale of Series D Preferred Stock to repay debt under the 2024 Credit Agreement, and thereafter for working capital purposes.

Key Dates

Keywords

Series D Preferred Stock, Preferred Stock, Orion Equity Partners, Hyperscale Data, Resale, Equity Financing, NYSE American, Dividends, Commitment