The proxy reveals a coordinated push by the Ault/Hyperscale Data group to consolidate control through super-voting stock and blank-check preferred authorization, while simultaneously diluting existing holders via the SJC convertible note conversion. The company's deteriorating financials (swing to $2.5M loss) and the CEO's rising compensation despite losses raise governance red flags. Watch for the November 18 vote outcome — if all proposals pass, the Ault group could cement near-total voting control, potentially leading to a squeeze-out or going-private transaction at a discount.
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Executive Summary
DeFi Capital Markets' 2026 proxy statement seeks approval for a dilutive convertible note conversion (up to 46.7% dilution to SJC Lending), authorization of 25M blank-check preferred shares and 25M super-voting Class B common shares (25 votes/share vs 1 vote/share for existing common), and re-election of two Class I directors. The filing occurs against a backdrop of aggressive open-market buying by the Ault/Hyperscale Data group (now ~40.8% beneficial owner) through three recent SC 13D/A amendments, signaling potential activist control consolidation. The company reported a net loss of $2.486M for FY2026 vs a $501K profit in FY2025, with CEO Grossblatt receiving $513,504 in total compensation.
Key Facts
- Proposal 5 seeks shareholder approval to issue up to 2,650,000 shares (46.7% dilution) to SJC Lending upon conversion of $2.65M convertible notes at a floor price of $1.00 per share.
- Proposal 3 authorizes 25M shares of blank-check preferred stock with terms set by the Board, enabling anti-takeover defenses without further shareholder vote.
- Proposal 4 authorizes 25M shares of Class B common stock with 25 votes per share (super-voting), which could entrench management and violate NYSE American Section 122 voting rights policy.
- Net loss of $2.486M for FY2026 vs net income of $501K in FY2025 — a $2.987M swing to the negative.
- Hyperscale Data/Ault group now beneficially owns 39.25% of DCM, with Milton C. Ault III individually deemed to own 40.79%.
- CEO Harvey Grossblatt (age 80) received $513,504 total compensation in FY2026, up 18.5% from $433,280 in FY2025, despite the company swinging to a loss.
- CEO pay ratio of 6.81:1 vs median employee ($75,401).
- Related-party transactions: $162K in company expenses charged to CEO's personal credit cards in FY2026 (down from $1.097M in FY2025).
- Director Milton Ault III settled SEC charges in August 2023 for $235,504 in penalties/disgorgement related to alleged securities law violations at Hyperscale Data.
- Annual meeting is November 18, 2026; record date October 20, 2026.
Financial Impact
Up to 46.7% dilution from convertible note conversion (2.65M shares at $1.00 floor price); net loss of $2.486M in FY2026 vs $501K profit in FY2025; CEO compensation $513,504.
Risk Factors
- Massive dilution (up to 46.7%) from convertible note conversion if Proposal 5 passes.
- Super-voting Class B stock (25 votes/share) could entrench management and disenfranchise common shareholders.
- Blank-check preferred stock could be used as a poison pill to block any hostile takeover attempt.
- Potential NYSE American delisting risk if Class B issuance violates Section 122 voting rights policy.
- CEO compensation increased 18.5% despite company swinging to a $2.5M loss — pay-for-performance misalignment.
- Activist Ault group (40.8% beneficial owner) may push for a low-ball going-private transaction.
- Related-party transactions with CEO's personal credit cards create governance concerns.
- Director Ault's prior SEC settlement for securities law violations raises integrity questions.
Documents Analyzed
This report is based on 4 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| DEF 14A Filing (Primary) | 0001104659-26-117433 |
| Document: 0001104659-26-117433-index-headers.html | 0001104659-26-117433 |
| Document: 0001104659-26-117433-index.html | 0001104659-26-117433 |
| Document: 0001104659-26-117433.txt | 0001104659-26-117433 |
Track record builds as more directional reports settle.
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Oct 26, 2026 today | S-3 | $3.57 | awaiting T+1 | — | $3.72 (−4.20%) |
Oct 26, 2026 today | DEFA14A | $3.57 | awaiting T+1 | — | $3.72 (+4.20%) |
Oct 20, 2026 6d ago | DEF 14A | $4.06 $3.85 | ▲ +5.17% | ▲ +3.99% | $3.72 (+8.37%) |
Oct 1, 2026 25d ago | SC 13D/A | $4.88 $4.72 | ▼ −3.28% | ▼ −3.95% | $3.72 (−23.77%) |
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