Neighborhood Intelligence is launching a registered direct stock offering led by Highbridge Capital Management-associated funds with participation from the company’s President’s List investing network, including the company’s executive chairman and CEO Marcus Lemonis, with an initial goal of raising $45.5 million.
The Bed Bath & Beyond parent also has called off its Fathom Holdings merger, one that would have changed the ownership structure of Neighborhood Intelligence’s blockchain assets.
Neighborhood Intelligence reported it intends to use the proceeds from the direct stock offering to accelerate merger synergies and build inventory, with any remaining proceeds going toward working capital and general corporate purposes.
The company has entered into a definitive agreement for the purchase and sale of an aggregate of 16.5 million shares of its common stock, or pre-funded warrants in lieu of stock, at $2.76 per share. It will issue warrants to purchase up to $16.1 million shares of common stock, with the warrants having an exercise price of $3.45 per share. They will become exercisable six months following the initial issuance date and expire five years after. Neighborhood Intelligence noted it expects the offering’s close on or about October 6.
The company anticipates receiving aggregate offering gross proceeds of about $45.5 million, it maintained, before deducting related expenses. The potential additional gross proceeds from the warrants, if fully exercised on a cash basis, would be $56.25 million. Neighborhood Intelligence added it gives no assurance that any of the warrants will be exercised or that it will receive associated cash proceeds.
Lemonis (pictured above) will participate in the offering at the same purchase price per share as other investors but has elected to forgo the accompanying warrants and will receive only shares of common stock, the company reported.
The proceeds from the offering will support Neighborhood Intelligence operations, with the company asserting that it continues to execute on established strategy and has its business trajectory on course. As evidence, Neighborhood Intelligence cited:
- Strong Revenue Momentum and Margin Outperformance. The company is experiencing encouraging revenue momentum across its core business, while gross margin continues to show year-over-year improvement. Based on current trends, it expressed the belief that gross margin could exceed 30%, ahead of a previously declared target and reflecting continued improvement in business mix and operating execution.
- Cost Reductions and Merger Synergies Ahead of Schedule. The company has made progress removing costs from the business, while integration efforts and anticipated merger synergies are developing faster than expected. Management is focused on accelerating such opportunities while maintaining disciplined execution across the organization.
- Focus on the Core Business and Organic Growth. The company remains focused on strengthening its core business, driving organic revenue growth, improving margins and continuing to reduce its cost structure as the housing and consumer environment continue to evolve. It does not anticipate pursuing additional acquisitions and intends to prioritize execution, integration and organic growth across its existing businesses.
The direct stock offering reflects the Neighborhood Intelligence ongoing emphasis on core business and on disciplined capital management, according to the company. As part of that focus, Neighborhood Intelligence intends to reduce the size of its at-the-market equity offering facility by more than half, from $200 million to about $75 million, with the actions supporting Neighborhood Intelligence’s commitment to accelerating merger synergies, improving operating efficiency and strengthening its balance sheet.
As for the merger, Neighborhood Intelligence indicated that both its board of directors and that of Fathom Holdings determined that proceeding with the combination at current valuations would not appropriately reflect either company’s value. As such, they mutually decided to terminate the merger agreement although they left open the possibility of ongoing strategic alliances.
On September 24, Fathom Holdings and Neighborhood Intelligence jointly announced they agreed to explore a potential alternative transaction that would replace a merger agreement revealed on June 16 designed to combine Fathom’s national residential brokerage and title business with substantially all of Neighborhood Intelligence digital asset holdings. Under the updated transaction, NXH would have contributed its 38.8% direct and indirect ownership interest in tZERO Group, its Medici-related fund assets and its direct investment in GrainChain to Fathom.
In the June 16 announcement, Neighborhood Intelligence said it would acquire Fathom Holdings, a technology-driven real estate services platform that integrates residential brokerage, mortgage, title, insurance and SaaS operations to advance the company’s strategy to create a whole home business that would provide the full range of products and services householders require.
Neighborhood Intelligence has insisted that the potential value of its blockchain assets isn’t appropriately reflected in current market valuations. As such, the company said it intends to retain ownership and control as a means of enabling shareholders to participate in potential future value as the assets and the broader blockchain ecosystem develop.
