SCHEDULE 13D: Nantahala Capital Significantly Boosts Stake in Xtant Medical, Acquiring Nearly Half of Outstanding Shares

Nantahala Capital Management and its affiliated funds have acquired a substantial block of Xtant Medical Holdings, Inc. common stock, increasing their beneficial ownership to 49.1% of the company.

Summary

• Nantahala Capital Management, LLC and its affiliated funds, collectively referred to as the 'Nantahala Investors', have significantly increased their stake in Xtant Medical Holdings, Inc. (the 'Issuer').
• On April 10, 2025, the Nantahala Investors entered into a Stock Purchase Agreement (SPA) to acquire 57.0 million shares of Xtant Medical's Common Stock from ROS Acquisition Offshore LP, Royalty Opportunities S.ar.l, and OrbiMed Royalty Opportunities II, LP (affiliates of OrbiMed Advisors LLC).
• The purchase price for these shares was $0.42 per share, totaling approximately $23.94 million for the 57.0 million shares acquired by Nantahala Investors.
• The transaction was consummated on April 14, 2025, using cash on hand.
• Prior to this purchase, Nantahala Investors already held 11,394,000 shares of Common Stock, primarily acquired from the Issuer in private investments.
• Following the acquisition, Nantahala Capital Management, LLC, along with its principals Wilmot B. Harkey and Daniel Mack, beneficially own an aggregate of 68,394,000 shares of Common Stock, representing 49.1% of the Issuer's outstanding class.
• Nantahala Capital Partners Limited Partnership (NCP), one of the Nantahala Investors, specifically purchased 14,516,557 shares in this transaction, bringing its beneficial ownership to 16,380,396 shares, or 11.8% of the class.
• The Reporting Persons state their investment is for ordinary investment purposes and they may engage with the Issuer's management and Board, discuss with other investors, and propose changes to capitalization, ownership, Board structure, or operations.
• A Registration Rights Agreement was also entered into, obligating Xtant Medical to file a shelf resale registration statement for the acquired shares within 30 days of the purchase consummation and to use commercially reasonable efforts to have it declared effective within 60-90 days.

Sentiment

Score: 8

Explanation: The sentiment is highly positive due to a major institutional investor acquiring a near-majority stake, signaling strong confidence and potential for active engagement and strategic improvements. While there's a large block sale by previous investors, the new investor's significant commitment and stated intentions outweigh this.

Positives

• A significant increase in ownership by a major institutional investor like Nantahala Capital, reaching nearly 50% of the outstanding shares, can be seen as a strong vote of confidence in Xtant Medical's future.
• The stated intention of the Reporting Persons to potentially engage with management and the Board, and propose changes to capitalization or operations, suggests active involvement that could drive strategic improvements.
• The purchase of a large block of shares from existing institutional sellers (OrbiMed affiliates) indicates a transfer of ownership to a new, potentially more active, long-term investor.

Negatives

• The sale of a large block of shares by OrbiMed affiliates, while acquired by another investor, represents a divestment by a previous significant holder.
• The Reporting Persons explicitly state they may sell additional shares in the future, which could create downward pressure on the stock price if executed in large volumes.

Risks

• The Purchasers acknowledge that their investment in Xtant Medical is a speculative investment with limited liquidity and is subject to the risk of complete loss.
• Purchasers are responsible for their own tax liability arising from the purchase of shares.
• Both sellers and purchasers acknowledge the possibility of 'Excluded Information' (material non-public information) and waive any claims or liabilities related to its existence, possession, or non-disclosure, which means investors are proceeding with the understanding that not all information may be equally available to all parties.
• Shares are held in margin accounts, which may from time to time make use of margin, introducing leverage risk.

Future Outlook

The Reporting Persons intend to review their investment in Xtant Medical on a continuing basis. They may engage in communications with the Issuer's management and Board, discuss with other investors, and make proposals concerning changes to the capitalization, ownership structure, Board structure (including composition), or operations of the Issuer. They also retain the flexibility to purchase or sell additional shares or engage in other transactions that may increase or decrease their interest or economic exposure.

Industry Context

This transaction represents a significant shift in institutional ownership for Xtant Medical, a company operating in the medical device sector. The acquisition of a near-majority stake by a prominent investment firm like Nantahala Capital suggests a potential for increased strategic oversight and influence, which could impact the company's direction within the competitive medical technology industry.

Stakeholder Impact

• **Shareholders**: Significant change in major ownership, potentially leading to increased strategic influence from Nantahala Capital. The registration rights agreement facilitates future liquidity for the acquired shares.
• **Company Management/Board**: Potential for increased engagement and proposals from Nantahala Capital regarding corporate strategy, capitalization, and Board composition.
• **Employees, Customers, Suppliers**: Indirect impact if Nantahala Capital's influence leads to changes in business strategy or operational focus.

Next Steps

• Xtant Medical Holdings, Inc. is obligated to prepare and file a shelf resale registration statement with the SEC within 30 days of the purchase consummation (April 14, 2025).
• Xtant Medical Holdings, Inc. must use commercially reasonable efforts to cause the Resale Registration Statement to be declared effective by the SEC within 60 days of the purchase date (90 days if reviewed by the SEC).

Key Dates

Recommendation

Keywords

Xtant Medical Holdings Inc, Nantahala Capital Management, SEC Schedule 13D, Beneficial Ownership, Stock Purchase Agreement, Institutional Investment, Medical Devices, Biotechnology, Equity Stake, Share Acquisition, OrbiMed Advisors