RUM Group Inc. (formerly Rumble) (NASDAQ:RUM) entered into a binding warrant term sheet with an unaffiliated U.S.-based third-party cloud customer on Sunday, August 23, alongside a major commercial agreement.
Under the six-year contract, the customer will purchase access to graphics processing units (GPUs) and GPU services at the company’s Maysville, Georgia location, which is currently under development.
The commercial agreement features a total order value of approximately $13.7 billion, split evenly across three distinct tranches.
To establish binding obligations or liabilities for the third tranche, the customer must first review and approve the company’s proposed delivery date using reasonable discretion.
Both organizations will negotiate in good faith to complete a definitive warrant agreement.
Warrant Terms And Equity Structure
RUM, in an SEC filing on Monday, noted that the binding term sheet outlines the issuance of a warrant granting the customer the right to acquire up to 50.81 million Class A shares at an exercise price of $0.01 per share.
Vesting for these warrant shares directly correlates with customer purchases made under the commercial agreement and any potential future expansion agreements.
The initial 50% of the warrant shares vest in three tranches of 16.67% each as the customer fulfills purchase requirements for the first three commercial tranches.
The remaining 50% of the warrant shares are eligible to vest across five expansion tranches of 10% each if the parties execute subsequent commercial agreements for additional GPU services during the contract term.
Expansion Tranches And Termination Clauses
For all five expansion tranches to vest, the customer must purchase GPU services exceeding two-and-a-half times the volume delivered under the primary three tranches.
Any unvested portion of the warrant will automatically terminate upon the expiration or termination of the commercial or expansion agreements, or if the customer commits an uncured material payment breach.
RUM Price Action: RUM Group shares were up 5.30% at $9.52 at the time of publication on Monday, according to Benzinga Pro data.
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