Evernorth signs deal to sell up to 5.2 million new shares to Cantor to fund XRP buys

Nasdaq-listed XRP treasury company Evernorth Holdings (XRPN) has signed an agreement that lets it sell up to 5,218,935 newly issued shares of common stock to CF Principal Investments, an affiliate of investment bank Cantor Fitzgerald (Cantor). The company disclosed the deal on Oct. 23 (U.S. time) in a Form 8-K current report and a Form S-1 registration statement filed with the U.S. Securities and Exchange Commission (SEC), and said it would use the proceeds to buy more XRP, among other purposes.

A committed equity line, drawn down on demand

The arrangement differs from a conventional follow-on offering in which shares are sold all at once on a set date. On a trading day of its choosing, Evernorth may send a notice between 6 a.m. and 9 a.m. New York time, and Cantor then buys shares at 97% of that day's volume-weighted average price (VWAP). The company said in the filing that the facility is structured similarly to an at-the-market (ATM) offering, in which shares are sold gradually at market prices. Evernorth decides when and how much to sell.

The deal comes with limits. Cantor's purchases on any day cannot exceed 20% of that day's trading volume, and Cantor and its affiliates cannot beneficially own more than 4.99% of Evernorth's outstanding shares. Evernorth cannot send a sale notice if the previous day's closing price is below $1. The agreement runs until the first day of the month following the 14-month anniversary of signing and cannot be extended.

Sales will not start right away. The registration statement that allows Cantor to resell the shares it buys must first be declared effective by the SEC. In exchange for the commitment, Evernorth agreed to pay Cantor a cash commitment fee of $521,893.50 after the registration statement becomes effective. The fee may be recalculated upward based on the price of the first 1 million shares purchased, but the total cannot exceed $1 million. Because a Cantor-affiliated broker will handle the share sales, creating a conflict of interest, StoneX Financial took part in preparing the registration statement as a qualified independent underwriter under Financial Industry Regulatory Authority (FINRA) rules.

Full issuance would make the new shares 16.7% of Class A stock

According to the registration statement, XRPN closed at $15.46 a share on Nasdaq on Oct. 22. Selling all 5,218,935 shares at that price would raise about $80.7 million, or about $78.3 million after fees and expenses. The company said it cannot predict how many shares it will actually sell or how much it will raise.

Existing shareholders would be diluted accordingly. Evernorth had 26,094,680 Class A shares outstanding as of Oct. 22. If all the registered shares are issued, they would make up about 16.7% of total Class A shares. The company said it would use the proceeds for general corporate purposes, including buying XRP, activities within the XRP ecosystem and working capital, and wrote in the filing that it expects "a substantial portion" of the proceeds "will be used to acquire additional XRP." It added that it will have broad discretion over how the money is used.

About 473 million XRP held, and $30 million in notes sold to a Korean fund

Evernorth completed its merger with special purpose acquisition company (SPAC) Armada Acquisition Corp. II on Oct. 9 and began trading on Nasdaq on Oct. 12. According to the filing, the company held about 473 million XRP as of Oct. 9. Investors contributed about 388.91 million XRP in kind at the merger, and the company bought another 84,365,876 XRP with $214.1 million in cash from private placement subscriptions. Evernorth names XRP per share as its key performance indicator and wrote that it expects opportunities to issue shares and buy XRP when its stock trades at a premium to the net asset value (NAV) of its XRP holdings.

The company has also raised capital from a South Korean private investment fund. On Oct. 12, Evernorth issued $30 million of convertible notes due 2031 to Kyobo AIM Corporate Finance General Private Investment Trust No. 3, for which NH Investment & Securities acts as trustee. The notes carry 4% annual interest paid in kind (PIK), meaning the interest is added to principal rather than paid in cash. The initial conversion price is about $10.20 a share. The company said it would also use that money to buy XRP, among other purposes, and named Japan and South Korea as its initial focus markets for international expansion.

XRP at 1,718 won on Upbit, 0.7% above global prices

As of 8:32 p.m. KST on Oct. 26, XRP traded at 1,718 won on Upbit's Korean won market, down 0.9% from the previous day's close. At the same time it was 1,719 won on Bithumb and $1.2884 on Binance (about 1,706 won). The kimchi premium (the gap between prices on Korean exchanges and global markets) stood at about 0.7%. At that Binance price, Evernorth's holdings of 473 million XRP as of Oct. 9 would be worth about $609 million.