Even though its Nasdaq debut did not immediately result in proceeds for ReAlpha Tech Corp., it unlocked a $100 million source of private funding.
Going public was the condition on investment in the Dublin startup over three years by GEM Global Yield LLC SCS, a subsidiary of the firm Global Emerging Markets, based in New York City, Paris and the Bahamas.
ReAlpha now can request to draw down funds from the agreement reached last December, according to the purchase agreement filed with the U.S. Securities and Exchange Commission. GEM would then directly buy shares from ReAlpha at a price determined by trends of 30 days' trading of the stock.
The startup uses machine learning to help select short-term rentals for purchase, which it says provides entry to commercial real estate wealth-building for everyday investors. It has cited the GEM investment as one source to start buying properties, on which it would also take mortgages.
As of Monday, ReAlpha owned three properties after selling two since the start of August, according to its prospectus.
The company has to pay the investment firm a $1 million fee after the first $50 million is drawn, and another $1 million for the second half, the agreement said.
ReAlpha went public via direct listing on Monday, skipping an IPO. It registered for resale 4.1 million shares held by past investors, about 10% of its total shares. Company representatives are in a mandatory "quiet period" and not available for comment, a spokeswoman said.
Apparently those shareholders are not rushing to dump their stakes: Trading volumes have been tiny this first week, such as fewer than 17,000 shares on Monday, according to its Nasdaq summary.
But that first day set a high target for a long-term bet that is another form of the company's potential return to GEM. Under the agreement, ReAlpha issued warrants for GEM to buy up to 1.7 million shares at Monday's closing share price of nearly $407 – worth $691 million, according to SEC filings on Wednesday.
A warrant allows the holder to buy shares at a later date; these expire in five years. Right now, that means the stock would have to trade higher than $407 for GEM to be able to sell those shares at a profit.
The stock closed at $60.57 on Wednesday.
However, that risk is mitigated by another clause, according to the filings. As of Oct. 20, 2024, if ReAlpha stock is trading at less than about $366 per share, the warrants' exercise price drops to 110% of the current stock price. That's a narrower float to make up over the ensuing four years.
