Daktronics intends to convert $25M convertible promissory note into common stock

Daktronics (DAKT) announced that, after careful deliberation, the Board of Directors has determined that it is in the best interests of the Company and its common shareholders to exercise the Company’s right to convert an initial $7.0 million in face value of the $25 million senior second lien secured promissory note held by Alta Fox Capital Management into approximately 1.1 million shares of the Company’s common stock. The Board intends to deliver to Alta Fox notice of the conversion on November 11, 2024, with a conversion date of December 3, 2024. The Company intends to convert the remainder of the Convertible Note over the next several months, in tranches of up to $7 million in face value every 30 days, as provided for in the Convertible Note. The Board’s decision to force the conversion of the Convertible Note is consistent with the Company’s ongoing focus on balance sheet optimization and cost efficiency and will save the Company approximately $5.4 million in interest expense over the remaining term of the Convertible Note. To help offset the share dilution that will result from the conversion of the Convertible Note into common stock, the Company intends to execute on its existing share repurchase authorization as soon as practicable. The Company engaged in good faith with Alta Fox regarding an accelerated repayment of the Convertible Note as an alternative to the forced conversion of the Convertible Note or keeping the Convertible Note outstanding. Alta Fox and the Company have been unable to agree on terms that the Board believes are in the best interests of the Company and its shareholders. The Company remains amenable to considering reasonable proposals for a negotiated retirement of the Convertible Note.