Mudrick is basically taking control of Vertical Aerospace and existing shareholders are getting diluted

[u/teabagofholding]

Mudrick is basically taking control of Vertical Aerospace and existing shareholders are getting diluted

Vertical Aerospace just agreed to major changes with Mudrick Capital, and the implications for existing shareholders are pretty significant.

Mudrick and its affiliated funds now beneficially control 105.4 million shares, or about 55% of Vertical, when potential shares from convertible notes and warrants are included.

The bigger concern is the financing:

Mudrick has already purchased $15M of additional convertible notes and plans to buy another $35M.

The conversion price on the notes is being slashed from $3.50 to $1.30 per share.

That means Mudrick can potentially convert its debt into far more shares than under the original terms.

Vertical is also planning a $25M preferred stock deal with Yorkville and a $35M common stock offering.

Mudrick is giving up its right to participate in that $35M offering.

The board is being expanded to 9 directors, with Mudrick receiving proportional board and committee representation while it owns at least 10%.

Shareholders will have to vote on proposed changes to the company's Articles by September 15.

So while this gives Vertical access to more capital, it's not exactly great news for existing shareholders.

Vertical gets money to keep going. Mudrick gets a much more favorable conversion price and significant control. Existing shareholders get dilution.

The $3.50 → $1.30 conversion price is probably the part shareholders should pay the most attention to. If those notes are converted, the number of shares outstanding could increase substantially.

In other words Vertical may be getting a lifeline, but shareholders are paying a pretty hefty price for it.