8-K: RumbleOn Completes $10 Million Rights Offering and Backstop Private Placement

RumbleOn, Inc. has finalized a $10 million rights offering and backstop private placement, issuing new shares of Class B common stock.

Summary

• RumbleOn, Inc. completed a rights offering for its Class B common stock, which was partially backstopped by Stone House Capital Management, LLC.
• The rights offering resulted in subscriptions for 2,043,011 shares, representing approximately 85% of the shares offered at $4.18 per share.
• Stone House Capital Management, LLC purchased 349,333 unsubscribed shares at $4.18 per share for approximately $1.5 million.
• Following the offering and placement, RumbleOn has approximately 37,713,298 shares of Class B common stock outstanding.
• The company estimates net proceeds from the rights offering and private placement to be approximately $9.0 million.
• The proceeds are intended for general corporate purposes, including potential repayment of convertible senior promissory notes and satisfying capital financing obligations.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company successfully raised capital, the fact that the rights offering was not fully subscribed and required a backstop indicates some investor hesitancy. The funds raised are crucial for the company's financial obligations, which is a positive, but the need for the raise itself suggests underlying financial pressures.

Positives

• The company successfully raised approximately $9.0 million through the rights offering and backstop private placement.
• The backstop agreement ensured that all offered shares were purchased, providing the company with the full intended capital.
• The funds raised will help the company meet its financial obligations, including potential debt repayment.

Negatives

• The rights offering was not fully subscribed, with only 85% of the shares being purchased by existing shareholders.
• The company had to rely on the backstop purchaser to acquire the remaining shares, indicating a lack of full investor confidence in the offering.

Risks

• The company's reliance on the backstop purchaser to acquire unsubscribed shares may indicate potential challenges in future capital raises.
• The company's ability to repay its convertible senior promissory notes due January 1, 2025, depends on the successful use of the proceeds from this offering.
• The company's future performance is subject to various economic, industry, and political conditions.

Future Outlook

The company intends to use the proceeds for general corporate purposes, including potential repayment of debt and satisfying capital financing obligations. The company expects to have approximately 37,713,298 shares of Class B common stock outstanding after the transactions.

Industry Context

This capital raise is occurring in the context of RumbleOn's operations as a major player in the powersports retail market and its asset-light transportation services business. The funds are intended to support the company's ongoing operations and financial obligations.

Comparison to Industry Standards

• RumbleOn's rights offering and backstop private placement are a common method for companies to raise capital, particularly when facing financial obligations or seeking to fund growth.
• The 85% subscription rate in the rights offering is not uncommon, as not all shareholders may participate in such offerings.
• The use of a backstop agreement is a standard practice to ensure the full amount of capital is raised, providing certainty to the company.
• Comparable companies in the retail and transportation sectors often use similar financing methods to support their operations and growth initiatives.

Related Party Transactions

• Stone House Capital Management, LLC, managed by Mark Cohen, a member of the board of directors, participated in the backstop private placement.
• Mark Tkach and William Coulter, both members of the board of directors, are also holders of Class B common stock and participated in the rights offering.

Stakeholder Impact

• Shareholders who participated in the rights offering will receive new shares of Class B common stock.
• The company's ability to meet its financial obligations is improved, which benefits creditors.
• The capital raise supports the company's ongoing operations, which benefits employees and customers.

Next Steps

• The company will issue the shares from the rights offering to participating stockholders.
• The backstop private placement is expected to close on December 19, 2024.
• The company will use the proceeds for general corporate purposes, including potential debt repayment.

Key Dates

Keywords

rights offering, backstop private placement, Class B common stock, capital raise, Stone House Capital Management, equity financing, RumbleOn, share issuance