Digital Brands Group taps $3.5M convertible note and $100M equity line in July 23 capital deal
A $3,529,412 unsecured convertible note and a three-year equity purchase facility of up to $100 million put Digital Brands Group (Nasdaq: DBGI) in focus on July 23, when the Round Rock, Texas company filed an 8-K with…
A $3,529,412 unsecured convertible note and a three-year equity purchase facility of up to $100 million put Digital Brands Group (Nasdaq: DBGI) in focus on July 23, when the Round Rock, Texas company filed an 8-K with the SEC. Aegis Capital Corp. served as sole placement agent on a best-efforts basis. The first $1,000,000 installment on the note falls due on or before October 23, 2026.
The convertible note: terms and default exposure
The note's $3,529,412 principal reflects a $3,000,000 subscription divided by 0.85. Proceeds are directed toward general working capital and repayment of certain liabilities. Aegis collected a commission equal to 3.0% of the $3,000,000 subscription amount, paid from escrow at closing.
The repayment schedule is compressed. Payments of $1,000,000 fall due on or before each of October 23, November 23, and December 23, 2026, with a final payment of $529,412 due on or before the January 23, 2027 maturity date. Any amount not paid on time accrues interest at 20% per annum. A formal default triggers a mandatory payment equal to 120% of outstanding principal plus accrued interest.
Conversion rights exist only during a default event. At that point, the note converts at the greater of 90% of the lowest closing price across the five trading days before conversion or a stated floor price. Issuances remain capped at Nasdaq's 19.99% threshold until stockholder approval is obtained.
The equity line: structure and pricing
Alongside the note, Digital Brands Group entered an equity line of credit with the same purchaser, giving the company the right to sell up to $100 million of common stock over a commitment period ending July 23, 2029. Sales occur through regular puts and intraday puts, each priced at 95% of the applicable lowest daily volume-weighted average price or lowest traded price during the valuation period, subject to volume limits and a 19.99% exchange cap.
The purchaser's beneficial ownership from any single transaction cannot exceed 4.99% of shares outstanding, adjustable to 9.99% upon notice. As a commitment fee, the company paid 1.0% of the $100 million facility in common stock or, at the purchaser's election, pre-funded warrants. Aegis earns 3.0% of the gross purchase price on each subsequent sale of shares under the equity line.
What to watch
The company is required to file a Form S-1 registration statement covering the resale of Put Shares and Commitment Shares under a Registration Rights Agreement entered on the same date. The equity line is governed by Wyoming law, with disputes subject to mandatory arbitration.