Hyperscale Data, Inc., an electronic components manufacturer, has entered into a significant financial agreement, as detailed in a recent 8-K filing with the Securities and Exchange Commission. On Monday, the company disclosed an arrangement involving the sale of its Series C convertible preferred stock and associated warrants to Ault & Company, Inc., an affiliated entity.
The transaction, which took place on Thursday, October 18, 2024, saw Hyperscale Data sell 450 shares of Series C convertible preferred stock and warrants to purchase 133,038 shares of common stock for a total of $450,000. Since the initial agreement on November 6, 2023, Ault & Company has acquired a total of 45,600 shares of preferred stock and warrants to purchase approximately 13.48 million common shares, with an aggregate investment of $45.6 million. The agreement allows for the potential purchase of up to $75 million of Series C Convertible Preferred Stock and Series C Warrants in multiple closings.
The preferred stock and warrants were sold to Ault & Company under an exemption from the registration requirements of the Securities Act of 1933, pursuant to Section 4(a)(2). This exemption is typically used for transactions by an issuer not involving any public offering.
This move to raise capital through unregistered sales of equity securities is a strategic step for Hyperscale Data as it continues to finance its operations and growth initiatives. The company's common stock and preferred stock are traded on the NYSE American under the ticker symbols GPUS and GPUS PRD, respectively.
In other recent news, Hyperscale Data, Inc. has completed significant financial transactions, including a $45.15 million equity sale to Ault & Company, Inc. This forms part of a broader agreement allowing for the purchase of up to $75 million of Series C Convertible Preferred Stock and Series C Warrants. Hyperscale Data has also agreed to sell a real estate property in St. Petersburg, Florida for $13.2 million, with $11 million of the purchase price to be deposited into an account for the benefit of its senior secured lenders.
The company is making strategic moves to enhance its data center operations, particularly its artificial intelligence (AI) data center in Michigan, with plans to increase its capacity from approximately 30 megawatts to 300 megawatts. This expansion is contingent on necessary regulatory approvals and financing. Additionally, Hyperscale Data's shareholders have approved the conversion of a 10% OID Convertible Promissory Note into common stock, aligning with the analysis from Goldman Sachs, which suggests that AI could drive a 160% surge in data center power demand.
InvestingPro Insights
Recent financial data from InvestingPro paints a challenging picture for Hyperscale Data, Inc. (GPUS). The company's market capitalization stands at a modest $8.74 million, reflecting its current struggles. With a price-to-book ratio of 0.33 for the last twelve months as of Q2 2024, the stock appears to be trading below its book value, potentially indicating undervaluation or underlying financial concerns.
InvestingPro Tips highlight several red flags for investors to consider. The company is operating with a significant debt burden and may have trouble making interest payments. This aligns with the recent capital raise through the sale of preferred stock and warrants, suggesting a pressing need for liquidity. Additionally, GPUS is quickly burning through cash, which explains the ongoing efforts to secure funding through arrangements like the one with Ault & Company.
The stock's performance has been notably poor, with InvestingPro data showing a staggering 93.66% decline in total return over the past year. This significant drop underscores the market's current skepticism about the company's prospects and financial health.
Investors seeking a more comprehensive analysis can access 13 additional InvestingPro Tips for GPUS, offering deeper insights into the company's financial situation and market position.
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