SCHEDULE 13D/A: Diamondback Energy Affiliate Boosts Stake in Verde Clean Fuels with $50 Million PIPE Investment, Secures Board Seat

Cottonmouth Ventures LLC, an affiliate of Diamondback Energy, Inc., has completed a $50 million private investment in public equity (PIPE) in Verde Clean Fuels, Inc., increasing its beneficial ownership to 65.8% and securing a board designation right.

Summary

• Cottonmouth Ventures LLC, an affiliate of Diamondback Energy, Inc., completed a Private Investment in Public Equity (PIPE) in Verde Clean Fuels, Inc. on January 29, 2025.
• Cottonmouth purchased 12,500,000 shares of Verde Clean Fuels' Class A Common Stock at $4.00 per share, totaling an aggregate purchase price of $50,000,000.
• Following this transaction, the reporting persons (Diamondback Energy, Inc., Diamondback E&P LLC, and Cottonmouth Ventures LLC) beneficially own 14,500,000 shares of Class A Common Stock, representing approximately 65.8% of the outstanding shares.
• The calculation of outstanding shares is based on 9,549,621 shares reported as of November 11, 2024, plus the 12,500,000 PIPE Shares.
• In connection with the closing, a Registration Rights Agreement was entered into, requiring Verde Clean Fuels to register the resale of the PIPE Shares.
• An amendment to the Equity Participation Right Agreement was executed, removing certain contractual preemptive rights previously granted to Cottonmouth.
• Verde Clean Fuels filed its Fifth Amended and Restated Certificate of Incorporation, granting Cottonmouth the right to designate one director and one observer to the Board of Directors as long as Cottonmouth stockholders collectively own 10% or more of the voting power.
• Pursuant to this right, Johnny Dossey, a Cottonmouth designee, was appointed to Verde Clean Fuels' Board of Directors as a Class I director on January 29, 2025.

Sentiment

Score: 8

Explanation: The document reports a significant capital injection of $50 million, which is a strong positive for the company's financial position and future operations. It also indicates a deepened strategic partnership with a major energy player, securing board representation and registration rights, which are generally favorable developments despite the associated shareholder dilution.

Positives

• Verde Clean Fuels received a significant capital injection of $50,000,000 from Cottonmouth Ventures LLC through the PIPE investment.
• The PIPE investment strengthens the strategic alignment and commitment from a major energy player, Diamondback Energy, through its affiliate Cottonmouth.
• Cottonmouth Ventures LLC secured customary registration rights for its PIPE shares, facilitating potential future liquidity.
• The appointment of a Cottonmouth designee, Johnny Dossey, to the Board of Directors provides strategic oversight and integration with a significant shareholder.

Negatives

• Existing shareholders experienced dilution due to the issuance of 12,500,000 new Class A Common Stock shares in the PIPE transaction.
• Cottonmouth Ventures LLC's previously held contractual preemptive rights relating to the sale of equity securities of the Issuer were removed via an amendment to the Equity Participation Right Agreement.

Future Outlook

The document indicates that Verde Clean Fuels is required to register the resale of the PIPE Shares, suggesting future market activity related to these shares. The appointment of a new director and the amended corporate charter also point to a strengthened strategic partnership and governance structure moving forward.

Industry Context

This transaction reflects a trend of strategic investments by larger energy companies into clean fuels and renewable energy technologies, aligning with broader industry shifts towards decarbonization and sustainable solutions. Diamondback Energy's increased stake in Verde Clean Fuels suggests a strategic interest in the development and commercialization of technologies that convert waste into clean fuels.

Management Changes

Corporate Governance

Related Party Transactions

• The PIPE investment itself is a related party transaction, as Cottonmouth Ventures LLC is an affiliate of Diamondback Energy, Inc., a significant existing shareholder.
• The Registration Rights Agreement, Amendment No. 1 to Equity Participation Right Agreement, and the Board Designation Right are all agreements entered into with Cottonmouth Ventures LLC, a related party.

Stakeholder Impact

• Shareholders: Experience dilution from the issuance of new shares but benefit from the significant capital injection and strengthened strategic partnership. The increased concentration of ownership (65.8% by reporting persons) could impact minority shareholder influence.
• Employees: No direct impact mentioned, but a stronger financial position could provide stability.
• Customers/Suppliers: No direct impact mentioned.
• Creditors: Improved financial health due to the capital raise could enhance creditworthiness.

Next Steps

• Verde Clean Fuels is required to register the resale of the 12,500,000 PIPE Shares as per the Registration Rights Agreement.
• Johnny Dossey will serve as a Class I director until the Company's 2027 Annual Meeting of Stockholders.

Key Dates

Keywords

Verde Clean Fuels, Diamondback Energy, Cottonmouth Ventures, PIPE Investment, Schedule 13D, Equity Participation Right Agreement, Registration Rights Agreement, Board of Directors, Common Stock, Shareholder Ownership, Capital Raise, Corporate Governance