Digital asset SPAC delays crucial merger vote, leaving a deeply undercapitalized Old Glory Bank waiting on a $50M lifeline
Digital Asset Acquisition Corp., the SPAC in search of to mix with the mum or dad of regulated financial institution Old Glory Bank, postponed the shareholder vote on the deal to 10 a.m. Eastern Time on Aug. 14 from July 31.
The authentic assembly date fell two days after the acknowledged July 29 redemption deadline. DAAQ mentioned in a July 31 filing that it will proceed soliciting proxies however gave no purpose for the delay.
The postponement didn’t robotically reopen redemptions. DAAQ’s final prospectus says traders might withdraw a redemption request by way of the deadline and afterward solely with the corporate’s consent earlier than closing. The submitting doesn’t say whether or not DAAQ has authorised any post-deadline withdrawals.
Capital hole meets the money check
The mum or dad firm on the heart of the deal is Old Glory Holding Company. The financial institution was under two distinct capital thresholds going into the vote window. The remaining prospectus mentioned its Tier 1 leverage ratio remained under the peculiar 4% adequately capitalized threshold as of June 29, placing Old Glory in technical noncompliance with a merger-agreement covenant. Old Glory thought-about that noncompliance nonmaterial, in keeping with the submitting.
A May 2024 consent order from the Federal Deposit Insurance Corp. and Oklahoma State Banking Department units a a lot increased requirement. It requires a 14% Tier 1 leverage ratio whereas the order stays in impact, together with regulator-reviewed capital and enterprise plans and prior consent for dividends and bonuses. Separately, prompt-corrective-action guidelines limit progress, capital distributions, acquisitions, branches and new enterprise strains whereas the financial institution is undercapitalized.
The holding firm’s consolidated monetary disclosures say its capital just isn’t anticipated to cowl working losses and minimal regulatory capital wants over the subsequent 12 months, creating substantial doubt about its potential to proceed as a going concern.
Management identifies money from the merger as a mitigation, however says closing relies upon on different events and market situations and isn’t assured. The warning just isn’t a declaration that the financial institution is bancrupt or about to shut.
The merger agreement requires at the least $50 million of closing mixture money, calculated from belief money remaining after redemptions, PIPE proceeds truly acquired, and proceeds to be acquired from different transaction financing. The get together benefiting from the situation can waive it in a signed writing the place lawful.
DAAQ reported $178.58 million of trust securities and 17.25 million redeemable public shares as of March 31. That historic steadiness doesn’t present what will probably be obtainable at closing. The postponement submitting disclosed neither the July redemption tally nor the remaining belief money.
The July 7 prospectus additionally mentioned no PIPE or different transaction financing had been entered into or obtained. A June submitting mentioned DAAQ meant to barter non-redemption agreements, however the hooked up type recognized no executed investor or dedicated share quantity.
Approval timing stays unsure. As of the ultimate prospectus, a Federal Reserve utility was pending, and Nasdaq approval of the mixed firm’s preliminary itemizing remained a closing situation. The July 31 submitting introduced neither approval, although its silence doesn’t set up their present standing.
DAAQ now has two extra weeks to chase votes, whereas the deal’s money image stays murky. Investors want the redemption depend and agency funding commitments to see whether or not it will probably clear the $50 million closing check, plus a recent capital ratio to gauge Old Glory Bank’s shortfall.
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