Direct Digital Holdings converts debt to $25 million preferred stock

Direct Digital Holdings Inc. (NASDAQ: DRCT) announced the issuance of $25 million in Series A Convertible Preferred Stock through the conversion of existing debt. The preferred stock carries a conversion price of $2.50 per share of Class A Common Stock and includes a 10% cumulative annual dividend.

The transaction increases the company's stockholders' equity by $25 million, moving from a deficit of $24.6 million as of June 30, 2025, to an estimated positive shareholders' equity of approximately $0.4 million. The conversion reduces the company's debt service by more than $3.5 million annually and decreases maturing debt obligations scheduled for December 2026.

The preferred stock is redeemable at the company's discretion and votes on an as-converted basis with Class A common stock. Dividend payments are subject to declaration by the company's board of directors.

"This investment bolsters our balance sheet, provides financial flexibility to support our growth strategy, and significantly closes the gap on the shareholders' equity needed to regain compliance with Nasdaq's listing requirement regarding minimum stockholders' equity," said Mark Walker, CEO of Direct Digital Holdings.

The company operates through advertising technology platforms Colossus Media, LLC and Orange 142, LLC. Direct Digital Holdings continues to seek additional funding and strategic opportunities, according to the company statement.

Details of the preferred stock terms are disclosed in the company's Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission.

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