DEF 14C: Alpha Modus Holdings to Exchange Preferred Stock for Common Shares to Bolster NASDAQ Listing Compliance

Alpha Modus Holdings, Inc. announced the exchange of 3.2 million Series C Preferred Shares held by CEO affiliates for over 26 million Common Shares, a move aimed at simplifying its capital structure and addressing NASDAQ listing requirements.

Summary

• Alpha Modus Holdings, Inc. (the "Company") is undertaking an exchange of 3,200,000 shares of Series C Preferred Stock for 26,079,868 shares of Class A Common Stock.
• The Series C Preferred Shares involved in the exchange were held by four trusts affiliated with the Company's CEO, William Alessi, who is deemed the beneficial owner of these shares.
• The exchange was approved by the Company's Board of Directors and the Majority Stockholders (holding approximately 55.5% of outstanding voting stock) via written consent on May 27, 2025.
• The effective conversion price for the Preferred Shares was approximately $1.227 per common share, calculated based on the average of the five lowest closing prices of the Common Stock during the ten trading days prior to May 27, 2025.
• This corporate action is expected to become effective 20 calendar days after the Information Statement is first mailed or delivered to stockholders, which occurred on or about June 9, 2025.

Sentiment

Score: 6

Explanation: The action addresses a critical NASDAQ listing compliance issue and simplifies the capital structure by eliminating preferred share preferences and fixing future dilution. However, it involves significant immediate dilution for common shareholders and highlights the company's struggle with market valuation, making it a necessary but not overwhelmingly positive development.

Positives

• The exchange eliminates the liquidation preferences and redemption rights associated with the Series C Preferred Stock, simplifying the Company's capital structure.
• It fixes the number of common shares to be issued upon conversion, preventing potential future dilution that could have resulted from further decreases in the common stock's trading price.
• This action is intended to help the Company maintain its listing on the NASDAQ Capital Market by addressing the Minimum Market Value of Listed Securities (MVLS) deficiency.
• The CEO's affiliates have agreed to a lock-up period for the newly issued common shares until June 13, 2026, aligning with the original date the preferred shares would have become generally convertible.

Negatives

• The issuance of 26,079,868 new common shares will result in significant dilution for existing common stockholders, as it is nearly double the 13,828,806 common shares outstanding as of May 27, 2025.
• The transaction involves related parties (affiliates of the CEO), which, while approved by majority shareholders, can raise concerns regarding potential conflicts of interest or fairness to all shareholders.
• The Company's current market value of listed securities is less than $20,000,000, significantly below NASDAQ's $50,000,000 requirement, indicating ongoing challenges with its market valuation.

Risks

• **NASDAQ Delisting Risk**: The Company is currently not in compliance with NASDAQ's Minimum Market Value of Listed Securities (MVLS) requirement of $50,000,000, with its current MVLS being less than $20,000,000. The Company has until August 4, 2025, to regain compliance, and there is no guarantee this action alone will suffice.
• **Dilution Risk**: The issuance of 26,079,868 new common shares will significantly dilute the ownership percentage of existing common stockholders, potentially impacting per-share metrics and stock price.
• **Market Price Volatility**: The effective conversion price of the preferred shares was based on recent low closing prices, which may indicate ongoing volatility or downward pressure on the common stock's trading price.

Future Outlook

The Company aims to maintain its NASDAQ listing by addressing the Minimum Market Value of Listed Securities (MVLS) deficiency through this capital structure adjustment. The newly issued common shares are subject to a lock-up until June 13, 2026, aligning with the original preferred stock convertibility date, indicating a planned approach to managing the capital structure.

Management Comments

• "The Company agreed to the Exchange as issuing the Common Shares in exchange for and cancellation of the Preferred Shares will (i) eliminate the liquidation preferences and redemption rights with respect to the Preferred Shares, (ii) fix the number of shares Common Stock to be issued upon conversion of the Preferred Shares... and ensure that future decreases in the trading prices of the Companys common stock would not result in more shares of Common Stock being issued upon conversion, (iii) better enable the Company to maintain the listing of its Common Stock on NASDAQ..."

Industry Context

This action is a specific corporate finance maneuver to address a company's capital structure and regulatory compliance (NASDAQ listing rules). It highlights the challenges smaller public companies can face in maintaining exchange listings, particularly concerning market capitalization requirements, and the strategic decisions management must make to ensure continued public trading.

Corporate Governance

Related Party Transactions

• The exchange of 3,200,000 Series C Preferred Stock shares for 26,079,868 Common Stock shares involves four trusts affiliated with the Company's CEO, William Alessi, who is deemed the beneficial owner of these shares. Each of the four trusts will receive 6,519,967 Common Shares.

Stakeholder Impact

• **Common Stock Shareholders**: Will experience significant dilution due to the issuance of 26,079,868 new common shares, nearly doubling the outstanding common stock. However, the action aims to preserve the NASDAQ listing, which is beneficial for liquidity and visibility.
• **Preferred Stock Shareholders (CEO Affiliates)**: Will convert their preferred shares into common stock, fixing their ownership stake and eliminating preferred rights, while gaining potential liquidity after the lock-up period.
• **Company**: Benefits from a simplified capital structure, removal of preferred stock obligations, and a crucial step towards regaining NASDAQ compliance, which is vital for its public market presence and access to capital.
• **NASDAQ**: The action is a direct response to NASDAQ's deficiency notice, indicating the company's effort to comply with listing rules and maintain its exchange presence.

Next Steps

• The common shares will be issued on the 20th calendar day after the Information Statement is first mailed or delivered (on or about June 29, 2025).
• The Company must regain compliance with NASDAQ's MVLS requirement by August 4, 2025.
• The newly issued common shares held by CEO affiliates will remain locked up until June 13, 2026.

Key Dates

Recommendation

Keywords

Alpha Modus Holdings, SEC Filing, DEF 14C, Preferred Stock Exchange, Common Stock Issuance, NASDAQ Listing, Capital Structure, Stockholder Approval, Dilution, Corporate Governance, William Alessi, Series C Preferred Stock, Market Value of Listed Securities, MVLS Deficiency