Holders of TMTG convertible notes can require the company to buy back their notes for cash on 30 November. The price is the full outstanding principal plus accrued interest. If all eligible holders exercise their rights, the amended S-4 indicates a potential payment of approximately $1 billion plus interest.

The notes carry a conversion price of $34.722 per share, against TMTG’s 4 November close of $4.49. Converting now would yield shares worth just 13 cents for each dollar of principal, while exercising the 30 November repurchase right would entitle holders to their full principal in cash, plus accrued interest. Notwithstanding a few more weeks of TMTG credit risk, one might expect enthusiastic cashing-out at month-end. However, at 30 June, TMTG held $215.5 million in cash and cash equivalents, about a fifth of the potential $1 billion repayment.

TMTG also holds other financial assets, including digital assets, some pledged as security, and it says it may refinance, raise equity or sell digital assets to meet the demand. But each route has a cost. New borrowing would have to be secured on terms available to a loss-making company whose shares have reached a record low. Issuing new shares is another option, but one made materially worse by the collapse in TMTG’s share price. At $4.49, raising the full $1 billion would require issuing about 223 million shares, roughly twice as many as at September’s share price of around $9, and before any discount or fees. The dilution for existing shareholders would therefore be substantially greater. Selling digital assets would raise only what the market pays at the time, and pledged assets may not be freely available. Furthermore, those June cash figures predate TAE’s final $100 million loan draw in October.

 

 

TAE’s path forward

The companies say the merger will fund TAE’s path to commercial fusion power, including its first planned fusion power plant. If it succeeds, the returns could be enormous and $1 billion might eventually seem inconsequential. But for TAE, and fusion generally, the path to profitability is long, expensive and steepening.

TAE has drawn the full $300 million loan facility from TMTG. It requested the final $100 million on 30 September, and the funds were paid on 7 October. The company’s accounts for the three months to 30 June report recurring losses, negative operating cash flow and an accumulated deficit of about $1.8 billion. The accounts state that these conditions, together with its continuing funding needs, raise substantial doubt about its ability to continue as a going concern. Fusion is no stranger to elegant escapes from cash squeezes, but a leap from the frying pan does not guarantee clearing the fire, particularly given the heat around TMTG.

TMTG is scheduled to report its third-quarter results on 9 November. The amended S-4 lists a TMTG shareholder meeting on 14 December. TAE shareholder approval is also required. The merger agreement’s outside date is 18 December. After that, either party may end the deal in certain circumstances if it has not closed. For TAE, the steep pathway to power generation has become rockier. The question is less whether the deal can close than what financial capacity the combined company would have left to pursue TAE’s commercial ambitions if it does.