ZeroStack’s $1B MemeCore deal could dilute shares 167%

On Aug. 19 ZeroStack acquired 925,925,926 MemeCore tokens in exchange for 3.5 million common shares and pre-funded warrants that could convert into approximately 36,198,294 additional shares. The parties valued each token at $1.08, putting the transaction’s token consideration at about $1 billion; the deal was settled with tokens rather than cash.

ZeroStack reported 21,624,341 common shares outstanding as of Aug. 19. The 36,198,294 warrant shares equal about 167.4% of that share base. If shareholders authorize the issuance and every warrant is converted, outstanding shares would rise to 57,822,635, with the Aug. 19 base representing roughly 37.4% of the pro forma total.

The company disclosed the token purchase in a Form 8-K filed on Aug. 19 and submitted an S-3 resale registration on Aug. 21. Nasdaq Listing Rule 5635 requires shareholder approval for any issuance that would exceed a 19.99% limit, so the approval-gated warrants cannot be issued until a shareholder vote. The filings do not set a date for that vote.

The filings contain a one-share discrepancy: the 8-K lists 36,198,293 warrant shares while the S-3 lists 36,198,294. The S-3 resale registration covers a broader block of 54,609,992 shares held by seven groups identified in the filing.

That resale pool includes 10,028,935 private-placement shares issued across March 31, July 20 and Aug. 19; 5,954,743 shares issued to CEO Daniel Reis-Faria after earlier pre-funded warrants were exercised; 2,428,020 shares underlying executive stock options; and the 36,198,294 MemeCore warrant shares.

Named holders in the registration include Puple AI and Blockcat; insiders Daniel Reis-Faria, Executive Chairman Michael Heinrich and CFO Dany Vaiman; funds related to Hack VC Management; and Zero Gravity Labs. Puple AI and Blockcat are each registered for up to 19,849,147 shares, a bucket described as 1,750,000 already issued shares plus 18,099,147 approval-gated warrant shares.

The filing shows a small reconciliation mismatch for Zero Gravity Labs: a 4,608,684-share maximum is listed while the holder’s ownership is shown as 4,608,575 shares. The lower figure is used to make the totals reconcile in the filing. Registration does not mean these holders have sold or will sell any shares; they may sell all, some or none. ZeroStack would receive no proceeds from third-party resales and would receive cash only if the covered executive stock options are exercised for cash.

Only the pre-funded warrants are subject to a potential lockup of up to 10 years; the initial 3.5 million shares issued in the transaction are not subject to that long lockup. The filing notes any restriction on the warrant shares can be waived, released or renegotiated by mutual written consent.

Around the time of the filings MemeCore traded near $1.10, ranked in the top 50 by market capitalization, and showed a circulating supply in the low billions with an implied market cap above $1 billion.

Shareholder approval will determine whether the approval-gated warrants are issued and whether the company’s outstanding share count increases.