8-K: RumbleOn Launches $10 Million Fully Backstopped Rights Offering

RumbleOn, Inc. has commenced a $10 million fully backstopped registered rights offering to raise capital for general corporate purposes and debt repayment.

Summary

• RumbleOn, Inc. has initiated a $10 million rights offering, distributing non-transferable subscription rights to existing shareholders.
• The offering provides one subscription right for each share of Class A or Class B common stock held as of November 25, 2024.
• Each subscription right allows the purchase of 0.0677 shares of Class B common stock at a price of $4.18 per whole share.
• The rights offering is fully backstopped by Stone House Capital Management, LLC, and board members Mark Tkach and William Coulter.
• The company intends to use the proceeds for general corporate purposes, including repaying convertible senior promissory notes due January 1, 2025, and satisfying capital financing obligations.
• The subscription rights will expire if not exercised by 5:00 p.m. Eastern Time on December 12, 2024, unless extended by the company.
• No fractional shares will be issued; the number of shares purchased will be rounded down to the nearest whole number.
• Shareholders must hold at least 15 shares to purchase at least one share of Class B common stock.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The rights offering is fully backstopped, which reduces risk, and the funds will be used for debt repayment and general corporate purposes. However, there is a risk of dilution for non-participating shareholders, and the non-transferable nature of the rights limits flexibility.

Positives

• The rights offering is fully backstopped, ensuring the company will receive the full $10 million in proceeds.
• Existing shareholders have the opportunity to purchase additional shares at a set price.
• The funds raised will be used to pay down debt and for general corporate purposes.
• The involvement of board members in the backstop agreement demonstrates confidence in the company.

Negatives

• The subscription rights are non-transferable, limiting shareholders' flexibility.
• Shareholders who do not participate in the rights offering will experience dilution.
• The offering requires a minimum holding of 15 shares to purchase even one share of Class B common stock.
• The subscription rights will expire if not exercised by the deadline.

Risks

• The rights offering may not be completed if closing conditions are not met.
• The company may not be able to use the proceeds as intended.
• The company's stock price could be negatively impacted if the offering is not well-received.
• There is a risk of dilution for shareholders who do not participate in the offering.
• The company's ability to meet its financial obligations may be impacted if the offering is not successful.

Future Outlook

The company expects to use the proceeds from the rights offering for general corporate purposes, including repaying debt and satisfying capital financing obligations. The company may extend the subscription period at its discretion.

Management Comments

• The company has not made any recommendation to holders regarding participation in the rights offering.
• Holders should make an independent investment decision about whether to participate in the rights offering based on their own assessment of the company's business and the rights offering.

Industry Context

The rights offering is a method for RumbleOn to raise capital, which is common in the powersports industry. The company is the largest powersports retail group in the United States, and this capital raise could help them maintain their position and fund future growth.

Comparison to Industry Standards

• Rights offerings are a common method for companies to raise capital, particularly when they need to strengthen their balance sheet or fund specific projects.
• The backstop agreement with Stone House Capital Management and board members is a positive sign, indicating confidence in the company's future.
• The subscription price of $4.18 per share is a set price, which may be attractive to existing shareholders if they believe the company's stock is undervalued.
• The offering is similar to other rights offerings in that it provides existing shareholders with the first opportunity to purchase new shares before they are offered to the general public.

Related Party Transactions

• The support and standby purchase agreement involves Stone House Capital Management, LLC, which is managed by Mark Cohen, a member of the board of directors, and board members Mark Tkach and William Coulter.

Stakeholder Impact

• Shareholders have the opportunity to purchase additional shares, but those who do not participate will experience dilution.
• The company's creditors may benefit from the debt repayment using the proceeds of the offering.
• The company's employees may benefit from the improved financial stability of the company.
• The company's customers and suppliers may benefit from the company's continued operations and growth.

Next Steps

• Eligible shareholders should review the prospectus supplement and accompanying base prospectus.
• Shareholders must decide whether to exercise their subscription rights before the expiration date of December 12, 2024.
• Shareholders should contact their broker or the subscription agent for any questions or assistance.
• The company will deliver shares purchased in the rights offering on or about December 17, 2024.

Key Dates

Keywords

rights offering, subscription rights, Class B common stock, capital raise, backstop, dilution, debt repayment, Stone House Capital Management, Mark Tkach, William Coulter