The convertible note will become common stock without a market discount as Beeline pursues higher-margin lending and its proposed TYTL combination
Beeline Holdings CEO Nicholas Liuzza has invested another $500,000 in the mortgage company as it shifts more of its business toward Non-QM lending and a proposed residential-equity platform.
Liuzza made the investment through a convertible note approved by Beeline’s board, according to a Form 8-K filed Wednesday. The note will automatically convert into Beeline common stock at 4 p.m. ET on Aug. 19.
The conversion price will be the higher of $1.50 per share or the average closing five-day volume-weighted average price beginning Aug. 12. That means Liuzza will not receive shares at a discount to the market-based conversion price, although the conversion will add common shares.
“I am investing another $500,000 because I believe our recent results demonstrate that the strategy is working,” Liuzza said. “Revenue is growing, margins are improving, we have materially reduced expenses, and we are increasingly focused on higher-margin products that can generate greater revenue per transaction.”
Beeline did not release updated financial results with the announcement to quantify those changes.
The investment comes as the publicly traded lender attempts to build a broader business around mortgage origination, title services, Non-QM products, and home equity.
Beeline announced this month that it is seeking to acquire blockchain-based home equity platform TYTL Holdings through an all-stock transaction. The proposed combination would give Beeline ownership of the infrastructure supporting BeelineEquity, a product that lets qualifying homeowners sell a fractional interest in their property rather than take out a HELOC or cash-out refinance.
“The proposed TYTL combination adds another important dimension to that strategy,” Liuzza said. “BeelineEquity gives us the opportunity to participate in a differentiated residential equity product whose economics are not directly tied to interest rates, while leveraging technology and infrastructure we have already built.”
Beeline and TYTL have said they intend to develop a wholesale distribution channel for the product.
Related-Party Deal Remains Preliminary
The proposed acquisition remains subject to due diligence, negotiation of definitive agreements, valuation analyses, a fairness opinion, shareholder approval, and other closing conditions. Beeline has cautioned that the transaction may not be completed.
Liuzza is also a principal shareholder of TYTL, making the proposed combination a related-party transaction. Beeline formed a special committee of its board to evaluate and approve the deal.
Under the preliminary terms, existing Beeline shareholders would own approximately 60% of the combined company, while TYTL equity holders would own about 40%. Those percentages remain subject to valuation work and further negotiations.
Liuzza described the new investment as evidence that his financial interests are aligned with those of other Beeline shareholders.
“Our objective is straightforward: grow revenue, expand margins, maintain tight control over expenses and execute,” he said. “As CEO and the largest shareholder, my interests are directly aligned with our shareholders.”