S-11/A: Wheeler REIT Files Amendment for Common Stock Issuance Upon Preferred Stock Redemption and Conversion

Wheeler Real Estate Investment Trust files an amendment to its registration statement for the potential issuance of common stock upon the redemption and conversion of its Series D Preferred Stock.

Summary

• Wheeler Real Estate Investment Trust (WHLR) has filed Amendment No. 1 to Form S-11 with the SEC, concerning the registration of 5,005,014 shares of common stock.
• These shares are issuable upon the redemption and conversion of the company's Series D Cumulative Convertible Preferred Stock.
• The Series D Preferred Holders have the option to redeem their shares at $25.00 per share plus accrued dividends, payable in cash, common stock, or a combination thereof, at WHLR's discretion.
• The Series D Preferred Stock is also convertible into common stock at a conversion price of $488,448 per share.
• The company will not receive any proceeds from the issuance of common stock upon the redemption or conversion of the Series D Preferred Stock.
• The filing references multiple reverse stock splits that have been effected by the company in 2024 and 2025 to maintain Nasdaq listing compliance and potentially improve marketability.
• As of March 3, 2025, WHLR had 1,166,433 shares of common stock outstanding, with a last reported sales price of $2.21 per share.

Sentiment

Score: 3

Explanation: The document highlights significant financial challenges, including dilution, reverse stock splits, and reliance on stock issuance for redemptions, indicating a negative outlook.

Positives

• The company's portfolio is 93.1% leased as of December 31, 2024.
• The company has the flexibility to settle redemptions of Series D Preferred Stock in shares of Common Stock, cash, or a combination thereof.

Negatives

• The issuance of common stock upon redemption of Series D Preferred Stock has caused and is expected to continue causing substantial dilution of common stock and a steep decline in its stock price.
• The company has implemented multiple reverse stock splits in 2024 and 2025, which may indicate financial distress.
• The company will not receive any proceeds from the issuance of common stock upon the redemption or conversion of the Series D Preferred Stock.

Risks

• The company may be unable to maintain compliance with the continued listing requirements of the Nasdaq Capital Market.
• The reverse stock splits may decrease the liquidity of the shares of the company's common stock and could lead to a decrease in the company's overall market capitalization.
• The issuance of a substantial amount of the company's common stock as a result of the redemption has already caused and is expected to continue causing substantial dilution of common stock and a steep decline in its stock price.
• Adjustments to the conversion price of the Notes that have already occurred and are anticipated to continue as a result of additional redemptions will cause further dilution of common stock.
• The company's common stock ranks junior to its Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock with respect to amounts payable in the event of the company's liquidation, dissolution or winding up.
• The company's ability to service all of its indebtedness depends on many factors beyond its control, and if the company cannot generate enough cash to service its indebtedness, it may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.
• The company's level of debt and the limitations imposed on it by its debt agreements could have significant adverse consequences to its financial condition, results of operations, cash flow and per share trading price of its securities.

Future Outlook

The company intends to continue settling redemptions of Series D Preferred Stock in shares of Common Stock until the earlier of (a) the redemption of all outstanding shares of Series D Preferred Stock or (b) an agreed upon settlement with the holders of two-thirds of the then issued and outstanding Series D Preferred Stock.

Industry Context

The document reflects the ongoing challenges faced by smaller REITs in managing their capital structure and maintaining listing compliance in a volatile market environment.

Comparison to Industry Standards

• Reverse stock splits are a common strategy for companies facing delisting from major exchanges, but their long-term success is varied.
• The high conversion price of the Series D Preferred Stock is unusual and suggests a complex financial arrangement.
• The reliance on common stock issuance to satisfy preferred stock redemptions is a strategy that can be compared to other REITs facing liquidity constraints, such as CBL Properties prior to its bankruptcy.

Stakeholder Impact

• Existing common stockholders face significant dilution.
• Series D Preferred Holders have the opportunity to redeem or convert their shares.
• The company's ability to execute its business strategy may be affected by its capital structure.

Next Steps

• The company will continue to issue common stock upon redemption and conversion of the Series D Preferred Stock.
• The company will monitor compliance with Nasdaq listing requirements.

Key Dates