Ok smart people, lets see if we can figure this out.
SOHO is being acquired, evidently in Q1 2026 if the deal goes through.
SOHO has preferred stock, specifically SOHOB.
The acquisition announcement says this:
Holders of Sotherly’s 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, and 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock (collectively, the “Preferred Stock”) issued and outstanding immediately before the Effective Time (as defined in the Merger Agreement), shall be entitled to receive the Merger Consideration if the holder thereof elects to convert, subject to the terms and conditions contained in the Company’s charter (including any articles supplementary) (the “Charter”), including the share cap as defined therein, their respective shares of Preferred Stock into shares of Common Stock after the closing of the Merger.
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The series D SOHO preferred stock prospectus says this:
Upon the occurrence of a Change of Control, each holder of shares of Series D Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date (as defined herein), we have provided or provide notice of our election to redeem the Series D Preferred Stock) to convert some or all of the Series D Preferred Stock held by such holder on the Change of Control Conversion Date into a number of shares of our common stock per share of our Series D Preferred Stock to be converted equal to the lesser of:
| • | | the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid distributions to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series D Preferred Stock distribution payment and prior to the corresponding Series D Preferred Stock distribution payment date, in which case no additional amount for such accrued and unpaid distribution will be included in this sum) by (ii) the Common Stock Price (as defined herein); and
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| • | | 7.39645, (the “Share Cap”) subject to certain adjustments;
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subject, in each case, to provisions for the receipt of alternative consideration as described in this prospectus supplement.
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If we assume the series B prospectus says something similar, I think that means if the acquisition goes through (at $2.25) each preferred stock owner can choose to receive ($25/$2.25) = 11.11 shares of SOHO stock, which they then sell for $2.25 = $25.
Wait - nope. The most you can convert it into is 7.139645 shares of SOHO stock.
So you'd lose money if you convert. You gotta hang onto your preferred stock and hope for normal capital gains. OK.
Is that correct?
In other words, if the deal goes through, the preferred stock holder can sell their preferred stock for $25 on deal closure (or hold the preferreds, whichever they choose).
Am I understanding that correctly? Any M&A and preferreds stock experts out there?
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Here it is:
Each holder of Series B Preferred Stock is entitled to receive a maximum of 8.29187 shares of our common stock per share of Series B Preferred Stock, which may result in the holder receiving value that is less than the liquidation preference of the Series B Preferred Stock.
https://www.sec.gov/Archives/edgar/data/1301236/000095017025047657/soho-20241231.htm |
