It’s “Announce Your PIPE Day” Today…

People in finance love to make things super complicated.  Throw in some legal language and trying to make sense of the Easterly announcement and subscription agreement will make you feel like you belong in remedial reading.

However, what you need to know is that Easterly Acquisition Corp. has secured financing for $213 million with investors that include affiliated funds of Gallatin Point Capital, The Carlyle Group, Centerbridge Partners, L.P. and Bain Capital Credit.  The PIPE will include Series B preference shares and common shares and investors will also, receive 5-year warrants with a strike price equal to 125% of the Merger Price.

The problem is, we don’t yet know the Merger Price because Easterly has amended the merger agreement to move the date they are using for Sirus’s book value (used to calculate the Merger Price) to September 30th, rather than use June 30, 2018.

To be a little clearer:  First, the date on which the exchange ratio, used to calculate the number of Sirius common shares to be issued in the Merger, is being modified. Easterly’s common stock will be exchanged for Sirius’s common shares using a value equal to 1.05x Sirius’s diluted GAAP book value per share as of September 30, 2018 (the “Merger Price”), instead of June 30, 2018.

Second, there will be an adjustment post-closing if the estimated September 30th diluted book value (which was not provided) is different than the actual Sirius diluted GAAP book value per share on September 30, 2018.

If the diluted book value is different, the adjustment will result in either:

• The issuance of new Sirius common shares or a payment of cash by Sirius to CM Bermuda
• The surrender to Sirius of Sirius common shares owned by CM Bermuda or a payment of cash to Sirius from CM Bermuda

As for the Sponsor Shares that will be cancelled, the amount to be cancelled will be calculated assuming a total of $213 million in the private placement, regardless of whether an investor(s) backs out or fails to fund.  Additionally, the Sponsor will have to surrender 4,528,000 shares of Easterly common stock if the Merger Prices is less than $17.39.

Per the investor presentation filed in June, $17.47 represents 1.05x book value in a Sirius share equivalent or $10.31 in an Easterly share equivalent. However, that is using an older book value.

Hopefully a new presentation gets filed soon that lays this out in a clearer manner.