Prairie Operating Co. Announces Repurchase of Series F Preferred Stock and New Warrant Agreement: Detailed Shareholder Update

Prairie Operating Co. (Nasdaq: PROP) has entered into a significant material definitive agreement with Hudson Bay PH XIX LLC (also referred to as “High Trail”) that is likely to have an impact on the company’s capital structure and potentially its share price. The agreement, executed on April 8, 2026, involves the repurchase of a substantial portion of Series F Convertible Preferred Stock and the issuance of new warrants, alongside important registration and participation rights for the investor.

Key Points of the Agreement

• Repurchase of Series F Preferred Stock: Prairie Operating Co. has agreed to repurchase 13,727 shares of its Series F Convertible Preferred Stock from High Trail on the date of the agreement. This repurchase is part of a broader arrangement involving warrants and registration rights.
• Issuance of Penny Warrants: High Trail will receive “First Penny Warrants” (and potentially “Second Penny Warrants” under certain conditions) to purchase shares of Prairie’s common stock. The exercise of these warrants is tied to specific triggers, including share price performance and the continued existence of outstanding Series F Preferred Stock.
• Registration Rights: High Trail is granted robust registration rights. Prairie is required to file a registration statement with the SEC within 30 days of the agreement to register all shares issuable upon exercise of the First Penny Warrant. The company must use commercially reasonable efforts to have this statement declared effective within 30 days of filing (or 60 days if under SEC review). Failure to meet these deadlines or other registration failures could result in cash penalties payable to High Trail, calculated as 1% of the daily VWAP of the company’s shares multiplied by the number of registrable shares subject to the failure.
• Participation Rights: For 18 months following the agreement, High Trail has the right to participate in Prairie’s offerings of equity or equity-linked securities, up to 35% of the amount offered, with some exceptions (such as at-the-market offerings or certain equity plans).
• Customary Representations, Warranties, and Indemnification: The letter agreement contains standard representations, warranties, covenants, and indemnification obligations on both parties.
• Unregistered Sales of Equity Securities: The First Penny Warrant was issued without SEC registration, relying on a private placement exemption (Section 4(a)(2) and Rule 506(b) of Regulation D).
• Material Modification to Rights of Security Holders: The agreement and the warrants may materially impact the rights of current security holders due to potential dilution and changes in capital structure.
• Valid Issuance and Compliance: The company affirms that the warrants and any shares issuable upon exercise have been duly authorized and reserved, and that their issuance will not conflict with organizational documents, existing securities, or applicable law. No further board or shareholder approval (other than possible Nasdaq filings or state agency filings) is required for these issuances.
• Legend and Transfer Restrictions: The warrants and underlying shares will bear transfer legends unless and until they are registered or otherwise eligible for resale under Rule 144 or similar exemptions. The agreement provides for legend removal under certain conditions (e.g., registration effectiveness, Rule 144 eligibility).
• Accredited Investor Status and No General Solicitation: High Trail represents that it is an accredited investor and did not learn of the offering through general solicitation or advertising.
• No Underwriter Designation: Prairie Operating Co. will not identify High Trail as an underwriter in any public disclosures or SEC filings related to this transaction.

Potential Price-Sensitive and Shareholder-Relevant Issues

• Potential Dilution: The issuance of penny warrants and the corresponding registration of new shares could introduce significant potential dilution for current common shareholders, especially if exercised at favorable terms for the investor.
• Cash Penalties for Registration Failures: If Prairie fails to register the shares underlying the warrants or to maintain the effectiveness of the registration statement, it will be liable for cash penalties to High Trail. Such failures could negatively impact investor perceptions of governance and compliance.
• Participation Rights May Limit Other Investors’ Access: High Trail’s right to participate in up to 35% of future equity offerings may deter other institutional investors and could impact the pricing and dilution profile of future capital raises.
• Events Triggering Additional Warrants: Should the company’s share price not perform above certain thresholds by July 8, 2026, additional “Anniversary Warrants” may be issued, adding further dilution risk.
• Legend Removal and Liquidity: The ability to remove restrictive legends as soon as shares are freely tradable could increase the float and liquidity, but may also enable more rapid selling by High Trail, potentially impacting share price volatility.

Detailed Terms of the Warrant and Registration Rights

Mechanics of Exercise: Upon exercise, the company must deliver shares electronically via DTC within the specified settlement period. The warrants cannot be exercised to the extent they would result in the holder owning more than a specified percentage of outstanding common stock (customarily 4.99% to 9.99%, but subject to adjustment).

Adjustments: The warrants include standard anti-dilution protections for share splits, combinations, dividends, and fundamental transactions (such as mergers, asset sales, or change of control events).

Registration Failures (“Failures”): If the company fails to file or maintain the registration, it must pay 1% of the daily VWAP times the number of affected shares for each failure, accruing additional penalties for continued failures.

Participation Rights Exceptions: The agreement excludes at-the-market offerings, sales pursuant to an existing Standby Equity Purchase Agreement, and equity plans from the participation rights granted to High Trail.

Shareholder Takeaways

• This agreement represents a material change in Prairie’s capital structure and introduces new potential dilution through the issuance of warrants and possible future equity participation by High Trail.
• The company is taking steps to ensure liquidity and flexibility in future capital raises but at the cost of potentially significant dilution and priority rights to a single investor.
• The outcome and timing of the required registration statement filings, as well as the company’s ability to comply with the deadlines, will be important for shareholders to monitor, as failures will result in cash penalties.
• Issuances under this agreement could significantly increase the tradable float and impact share price dynamics, particularly if High Trail elects to sell shares upon registration effectiveness or legend removal.

Conclusion

This definitive agreement between Prairie Operating Co. and Hudson Bay PH XIX LLC is a notable event for investors. It introduces both opportunities and risks: while it may provide the company with additional capital and strategic flexibility, it also brings dilution and potentially increased volatility for existing shareholders. Investors should monitor subsequent filings for registration statement effectiveness, warrant exercises, and any additional equity offerings that could further alter the company’s capital structure.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult with their own advisors before making any investment decisions. The information provided herein is based on the company’s public filings as of the date indicated and may be subject to change.

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