Digital asset SPAC delays crucial merger vote, leaving a deeply undercapitalized Old Glory Bank waiting on a $50M lifeline

Digital Asset Acquisition Corp., the SPAC seeking to combine with the parent of regulated bank Old Glory Bank, postponed the shareholder vote on the deal to 10 a.m. Eastern Time on Aug. 14 from July 31.

The original meeting date fell two days after the stated July 29 redemption deadline. DAAQ said in a July 31 filing that it would continue soliciting proxies but gave no reason for the delay.

The postponement did not automatically reopen redemptions. DAAQ's final prospectus says investors could withdraw a redemption request through the deadline and afterward only with the company's consent before closing. The filing does not say whether DAAQ has approved any post-deadline withdrawals.

Capital gap meets the cash test

The parent company at the center of the deal is Old Glory Holding Company. The bank was below two distinct capital thresholds going into the vote window. The final prospectus said its Tier 1 leverage ratio remained below the ordinary 4% adequately capitalized threshold as of June 29, putting Old Glory in technical noncompliance with a merger-agreement covenant. Old Glory considered that noncompliance nonmaterial, according to the filing.

A May 2024 consent order from the Federal Deposit Insurance Corp. and Oklahoma State Banking Department sets a much higher requirement. It requires a 14% Tier 1 leverage ratio while the order remains in effect, along with regulator-reviewed capital and business plans and prior consent for dividends and bonuses. Separately, prompt-corrective-action rules restrict growth, capital distributions, acquisitions, branches and new business lines while the bank is undercapitalized.

The holding company's consolidated financial disclosures say its capital is not expected to cover operating losses and minimum regulatory capital needs over the next 12 months, creating substantial doubt about its ability to continue as a going concern.

Management identifies cash from the merger as a mitigation, but says closing depends on other parties and market conditions and is not assured. The warning is not a declaration that the bank is insolvent or about to close.

The merger agreement requires at least $50 million of closing aggregate cash, calculated from trust cash remaining after redemptions, PIPE proceeds actually received, and proceeds to be received from other transaction financing. The party benefiting from the condition can waive it in a signed writing where lawful.

DAAQ reported $178.58 million of trust securities and 17.25 million redeemable public shares as of March 31. That historical balance does not show what will be available at closing. The postponement filing disclosed neither the July redemption tally nor the remaining trust cash.

The July 7 prospectus also said no PIPE or other transaction financing had been entered into or obtained. A June filing said DAAQ intended to negotiate non-redemption agreements, but the attached form identified no executed investor or committed share amount.

Approval timing remains uncertain. As of the final prospectus, a Federal Reserve application was pending, and Nasdaq approval of the combined company's initial listing remained a closing condition. The July 31 filing announced neither approval, though its silence does not establish their current status.

DAAQ now has two more weeks to chase votes, while the deal's cash picture remains murky. Investors need the redemption count and firm funding commitments to see whether it can clear the $50 million closing test, plus a fresh capital ratio to gauge Old Glory Bank's shortfall.

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