Rent the Runway Rights Distribution
September, 2025 - In connection with the transaction, the Company will initiate a rights offering to give existing stockholders an opportunity to purchase up to $12.5M of shares at a price of $4.08 per share, equal to a 20% discount to the 30-day volume weighted average price as of August 19, 2025. The rights offering will be fully backstopped by APS, STORY3 and Nexus.
Source: Company Press Release.
Linked here.
Per the filing provided by the company, terms are as follows. Prospectus linked here.
The rights offering is non-taxable. Holders should allocate basis to the right based on the relative share consideration of both securities.
Pro-Tip: It is industry standard that cost basis will not be allocated to the right unless the consideration is above 15% of the common stock value.
Receipt of Rights
Although the authorities governing transactions such as this offering are complex and unclear in certain respects (including with respect to the effects of the over-subscription privilege), we believe and intend to take the position that a U.S. Holder’s receipt of rights pursuant to this offering should not be treated as a taxable distribution with respect to such holder’s existing shares of Common Stock for U.S. federal income tax purposes. Section 305(a) of the Code generally provides that the receipt by a stockholder of a right to acquire stock or warrants is not included in the taxable income of the stockholder; however, the general non-recognition rule in Section 305(a) of the Code is subject to exceptions described in Section 305(b) of the Code, which include “disproportionate distributions.” A disproportionate distribution is generally a distribution or a series of distributions, including deemed distributions, that has the effect of the receipt of cash or other property by some stockholders (including holders of rights to acquire stock and holders of debt instruments convertible into stock) and an increase in the proportionate interest of other stockholders (including holders of rights to acquire stock and holders of debt instruments convertible into stock) in a corporation’s assets or earnings and profits. We have not made any distributions of cash or property (other than stock or rights to acquire stock) with respect to our stock or stock options. Currently, we do not intend to make any future distributions of cash or property (other than stock or rights to acquire stock) with respect to our stock or stock options; however, there is no guarantee that we will not make such distributions or payments, or distributions or payments in respect of other equity or convertible debt instruments, in the future. This position regarding the non-taxable treatment of this offering is not binding on the IRS or the courts. If this position is finally determined by the IRS or a court to be incorrect, whether because, contrary to our expectations, distributions of cash or property (other than stock or rights to acquire stock) are made with respect to our stock or stock options, because the issuance of the rights is a “disproportionate distribution” or for any other reason, the fair market value of the rights would be taxable to U.S. Holders of our Common Stock generally in the manner as described below under “—Distributions on Common Stock.” The remainder of this discussion is based upon the treatment of this offering as a non-taxable distribution with respect to a U.S. Holder’s existing shares of Common Stock for U.S. federal income tax purposes.
