DEF: Prairie Operating Co. Seeks Stockholder Approval for Potential Common Stock Issuance Related to Series F Preferred Stock and Warrants

Prairie Operating Co. is seeking stockholder approval to issue common stock upon conversion of Series F Preferred Stock and exercise of warrants, as required by Nasdaq rules, to maintain compliance and facilitate potential future conversions and exercises.

Summary

• Prairie Operating Co. is holding a special meeting of stockholders on May 8, 2025, to vote on proposals related to the issuance of common stock.
• The primary proposals involve seeking approval for the issuance of shares of common stock upon the conversion of Series F Convertible Preferred Stock and the exercise of warrants issued under a Securities Purchase Agreement dated March 24, 2025.
• The company needs stockholder approval to comply with Nasdaq rules, specifically Nasdaq Listing Rules 5635(b) and 5635(d), which require approval for issuances exceeding 20% of outstanding common stock or that could result in a change of control.
• The Series F Preferred Stock has a stated value of $1,000 per share, and 148,250 shares were issued.
• The company received approximately $139.1 million in net proceeds from the offering of the Preferred Shares.
• Holders of common stock owning more than 50% of the outstanding shares have entered into voting agreements to vote in favor of the proposals.
• The company is also seeking approval for a proposal to adjourn the special meeting if necessary to solicit additional proxies.
• If the proposals are not approved, the company may be prevented from issuing the underlying common stock shares, which could discourage future investors and require additional special meetings.

Sentiment

Score: 6

Explanation: The document is primarily informational, outlining the proposals for the special meeting. While the need for stockholder approval introduces some uncertainty, the secured voting agreements and completed financing provide a degree of stability. The potential dilution and restrictions on operational flexibility are negative factors.

Positives

• The company has secured voting agreements from holders of more than 50% of the outstanding common stock, increasing the likelihood of proposal approval.
• The offering of Preferred Shares has already closed, providing the company with $139.1 million in net proceeds.
• The company is taking steps to ensure compliance with Nasdaq rules, which can enhance investor confidence.
• The company is seeking flexibility to fully issue shares of Common Stock that are issuable upon the conversion of or otherwise pursuant to the terms of the shares of Series F Preferred Stock under the Certificate of Designation and the Securities Purchase Agreement (without regard to any limitations set forth thereon).

Negatives

• The issuance of common stock upon conversion of the Series F Preferred Stock will cause substantial dilution to existing stockholders.
• If the company defaults on any terms or obligations relating to the Series F Preferred Stock, the company's financial condition, results of operations, liquidity, prospects, and cash flows would be materiality and adversely impacted.
• The company may be prevented from issuing the Underlying Preferred Stock Shares, upon conversion of the Series F Preferred Stock by the holder thereof or otherwise pursuant to the terms thereof, in a manner that complies with Nasdaq Rule 5635.
• The company will also be obligated to incur additional management resources and expenses to call and hold a special meeting of the stockholders every ninety (90) days thereafter to seek such stockholder approval until the date such stockholder approval is obtained.

Risks

• The issuance of common stock upon conversion of the Series F Preferred Stock will cause substantial dilution, which may materially affect the trading price of the common stock and earnings per share.
• The company may not be able to obtain stockholder approval, which could prevent the issuance of common stock and discourage future investors.
• The terms of the Series F Preferred Stock contain various covenants and restrictions that could limit the company's operational flexibility.
• The company's financial condition, results of operations, liquidity, prospects, and cash flows would be materiality and adversely impacted if the company defaults on any terms or obligations relating to the Series F Preferred Stock.

Future Outlook

The company intends to use the net proceeds from the Preferred Offering, together with the net proceeds from Concurrent Common Stock Offering, to fund a portion of the purchase price for the Bayswater Acquisition.

Management Comments

• Our Board of Directors unanimously recommends that you vote FOR each of the proposals described in this Proxy Statement.
• We urge you to read these proxy materials in their entirety and to consider them carefully, including the effect that adopting or failing to adopt the proposals will have on stockholders.

Industry Context

The need for stockholder approval to issue shares is a common requirement for companies listed on the Nasdaq Capital Market, particularly when the issuance could result in significant dilution or a change of control. This is especially relevant in the oil and gas industry, where acquisitions and financings can lead to substantial changes in a company's capital structure.

Comparison to Industry Standards

• Seeking stockholder approval for issuances exceeding 20% of outstanding shares is standard practice for Nasdaq-listed companies.
• Many companies in the oil and gas sector use convertible preferred stock and warrants as financing tools, similar to Prairie Operating Co.'s approach.
• The specific terms of the Series F Preferred Stock, such as the conversion price, dividend rate, and redemption provisions, would need to be compared to similar offerings by peer companies to assess their competitiveness.
• Companies like Range Resources and Southwestern Energy have used similar financing structures in the past, but the details of each offering vary based on the company's specific circumstances and market conditions.

Stakeholder Impact

• Approval of the proposals will allow the company to issue common stock, potentially diluting existing stockholders' ownership.
• Failure to approve the proposals could limit the company's ability to access capital and fund operations, impacting all stakeholders.
• The terms of the Series F Preferred Stock and warrants could affect the company's financial flexibility and ability to execute its business strategy.

Next Steps

• Stockholders need to vote on the proposals outlined in the proxy statement.
• The company will hold the Special Meeting of Stockholders on May 8, 2025.
• The company will file a report on Form 8-K to announce the voting results.

Key Dates

Keywords

Series F Preferred Stock, common stock, Nasdaq, stockholder approval, warrants, conversion, issuance, dilution, Securities Purchase Agreement, Preferred Shares