Dec. 2—ASHLAND — A treasure trove of investment documents regarding the merger of Unity Aluminum and Steel Dynamics shows losses across the board for investors, but the potential hope for a hefty return for high-dollar investors still in the game.

At the time of July 2022 merger of Steel Dynamics and Unity Aluminum — formerly Braidy Industries — the majority shareholders signed off on a reverse stock split of Unity stock, converting 10,000 shares into a single share of stock.

For owners of 10,000 shares or less prior to the conversion, the shareholder would receive a $35,000 cash-out.

Considering the sale of common stocks prior to the implosion of Braidy in 2020, shares were sold at $18 or $10 a share — effectively, the stocks were worth $3.50.

However, once Commonwealth Seed — the state's investment vehicle for the $15 million invested during the Gov. Matt Bevin administration — cashed out in late September, the price offered to small-time stakeholders (those with fewer than 50,000 shares pre reverse-split) was reduced to $21,800.

In a purchase offer obtained by The Daily Independent, small-time investors have until Dec. 16 to pull the lever and at least recoup some losses.

Essentially, anyone who bought 10,000 shares at $10 a share would have $100,000 in the company. Prior to Commonwealth Seed cashing out, they would have seen a loss of $65,000. Now, that loss is almost $80,000.

According to the statements, the monies for the payouts was a result of $25.7 million Steel Dynamics paid for the merger. In turn, Unity would use that cash to pay back the Commonwealth and the small-time investors.

At the time of the merger over the summer, Unity was valued at $38 million.

According to the statements, Steel Dynamics started looking into Unity in November 2021, after financial advisor Headwall Partners had contacted 300 potential partners and received 10 non-binding term sheets for funding the aluminum mill.

Following the merger, all employees would stay on until the end of 2022.

However, for folks with more than 10,000 shares prior to the reverse split, they could stay in the game by holding common stock in the 5.6% stake Unity would have in the new company, Aluminum Dynamics.

An email sent to investors in November 2022 shows the amount of pre-merger sales eligible for a cash-out rose to 50,000 shares prior to the reverse split.

Under the terms of that agreement, Steel Dynamics could buy out the rest of the subsidiary for 100% ownership after five years.

That amount would be determined by a two-year average of the raw earnings divided by the net sales, multiplied by seven, minus any debt and then divvied out according to Unity's ownership percentage.

Unity Aluminum could also cash out using the same formula, except the average would be multiplied by six.

But wait, there's more.

In order to buyout the 40% stake the Russians had in Braidy Atlas — the subsidiary of that would have been the actual mill — Unity put up some cash on hand (nearly $6 million by the close of 2021, according to unaudited statements) and Unity Chairman Charles Price put up a $6 million promissory note. At the time prior to the merger, Price owned 16.8% stake in Unity, while his company Hannah Management LLC had another 14.4% stake. Following the reverse split, he's now at 20.7% personal ownership and Hannah Management has 17.7%.

Investors still in the game were given the option this fall to buy a portion of Price's debt, based on how much stock they owned in Unity. The terms of buying into that debt would be 6% compound interest year-over-year when the note matures in July 2029. For instance, if one has $100,000 worth of the debt, by the time the note came to term, they would get back $133,822.

However, if the holder of the note wants to cash out prior to that, the proportion of the note gets converted into Unity stock at $17,500 a share, even less than the cash-out offered to the small-time brokers.

The big takeaway?

It appears those with the intestinal fortitude to keep their money in the kitty could stand to win if Steel Dynamics builds the mill.

Of course, for the blue-collar men and women of northeastern Kentucky, that's likely not much of a consolation at all.