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Preferred Stock

9 Months Ended

Sep. 30, 2023

11. Preferred Stock

Series A Non-Voting Convertible Preferred Stock

On April 10, 2018, the Company filed a Certificate of Designations of Series A Non-Voting Convertible Preferred Stock (the “Series A Certificate of Designations”) with the Delaware Secretary of State establishing the rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Series A Preferred Stock (defined below). The Series A Preferred Stock is intended to provide ETFS Capital with economic rights equivalent to the Company’s common stock on an as-converted basis. The Series A Preferred Stock has no voting rights, is not transferable and has the same priority with regard to dividends, distributions and payments as the common stock.

As described in the Series A Certificate of Designations, the Company will not issue, and ETFS Capital does not have the right to require the Company to issue, any shares of common stock upon conversion of the Series A Preferred Stock, if, as a result of such conversion, ETFS Capital (together with certain attributable parties) would beneficially own more than 9.99% of the Company’s outstanding common stock immediately after giving effect to such conversion.

In connection with the completion of the acquisition of the European exchange-traded commodity, currency and leveraged-and-inverse business of ETFS Capital (the “ETFS Acquisition”), the Company issued 14,750 shares of Series A Non-Voting Convertible Preferred Stock (the “Series A Preferred Stock”), which are convertible into an aggregate of 14,750,000 shares of common stock. The fair value of this consideration was $132,750, based on the closing price of the Company’s common stock on April 10, 2018 of $9.00 per share, the trading day prior to the closing of the acquisition.

The following is a summary of the Series A Preferred Stock balance:

	September 30, 2023			December 31, 2022
Issuance of Series A Preferred Stock	$	132,750		$	132,750
Less: Issuance costs		(181	)		(181	)
Series A Preferred Stock—carrying value	$	132,569		$	132,569
Cash dividends declared per share (quarterly)	$	0.03		$	0.03

Temporary equity classification is required for redeemable instruments for which redemption triggers are outside of the issuer’s control. ETFS Capital has the right to redeem all the Series A Preferred Stock specified to be converted during the period of time specified in the Series A Certificate of Designations in the event that: (a) the number of shares of the Company’s common stock authorized by its certificate of incorporation is insufficient to permit the Company to convert all of the Series A Preferred Stock requested by ETFS Capital to be converted; or (b) ETFS Capital does not, upon completion of a change of control of the Company, receive the same amount per Series A Preferred Stock as it would have received had each outstanding Series A Preferred Stock been converted into common stock immediately prior to the change of control. However, the Company will not be obligated to make any such redemption payments to the extent such payments would be a breach of any covenant or obligation the Company owes to any of its secured creditors or is otherwise prohibited by applicable law.

Any such redemption will be at a price per Series A Preferred Stock equal to the dollar volume-weighted average price for a share of common stock for the 30-trading day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000. Such redemption payment will be made in one payment no later than 10 business days following the last day of the Company’s first fiscal quarter that begins on a date following the date ETFS Capital exercises such redemption right. The redemption value of the Series A Preferred Stock was $105,090 and $77,969 at September 30, 2023 and December 31, 2022, respectively.

The carrying amount of the Series A Preferred Stock was not adjusted as it was not probable that the Series A Preferred Stock would become redeemable.

Series C Non-Voting Convertible Preferred Stock

On May 10, 2023, the Company filed a Certificate of Designations of Series C Non-Voting Convertible Preferred Stock (the “Series C Certificate of Designations”) with the Delaware Secretary of State establishing the rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Series C Preferred Stock (defined below). The Series C Preferred Stock is intended to provide GBH with economic rights equivalent to the Company’s common stock on an as-converted basis. The Series C Preferred Stock has no voting rights, is not transferable, contains registration rights and has the same priority with regard to dividends, distributions and payments as the common stock.

As described in the Series C Certificate of Designations, the Company will not issue, and GBH does not have the right to require the Company to issue, any shares of common stock upon conversion of the Series C Preferred Stock, if, as a result of such conversion, GBH (together with certain attributable parties) would beneficially own more than 4.99% of the Company’s outstanding common stock immediately after giving effect to such conversion. Further, as described in the Series C Certificate of Designations, the Company will not issue any shares of common stock upon conversion of the Series C Preferred Stock if the issuance would exceed the aggregate number of shares of common stock that the Company may issue without breaching its obligations under the rules of the New York Stock Exchange, unless the Company obtains stockholder approval for the issuance of the Company’s common stock upon conversion of the Series C Preferred Stock in excess of such amount.

Each share of Series C Preferred Stock is convertible only in connection with the sale of all or any portion of the Company’s common stock on an arms-length basis to a bona fide third-party purchaser, pursuant to (i) an effective registration statement under the Securities Act of 1933, as amended (“Securities Act”) or (ii) an exemption from registration under the Securities Act, provided any such sale is conditioned on the terms set forth in the Investor Rights Agreement, dated May 10, 2023, between the Company and GBH.

Pursuant to the Investor Rights Agreement, GBH is subject to restrictions on the manner in which the Conversion Shares (defined below) can be sold and has agreed not to distribute or sell any Conversion Shares to any person that would knowingly result in that person, together with such person’s affiliates and associates, owning, controlling or otherwise having any beneficial ownership interest representing in the aggregate 5% or more of the then outstanding shares of the Company’s common stock. GBH has also agreed not to distribute or sell any Conversion Shares to ETFS Capital, GT or any of their affiliates, associates or any Group (as that term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as defined in Rule 13d-5 thereunder) formed by the foregoing persons.

In accordance with the SPA Agreement, the Company issued 13,087 shares of Series C Non-Voting Convertible Preferred Stock (the “Series C Preferred Stock”), which are convertible into an aggregate of 13,087,000 shares of common stock (“Conversion Shares”). The fair value of this consideration was $86,898, based on the closing price of the Company’s common stock on May 9, 2023 of $6.64 per share, the trading day prior to the closing of the acquisition.

GBH has no redemption rights associated with the Series C Preferred Stock and therefore the instrument has been classified as a component of stockholders’ equity, with the excess over par value of $86,801 (net of issuance costs of $97) recorded to additional paid in capital.