Apollo Global Management, Inc. — Form 8-K Summary
Reporting date: August 11, 2023. The filing reports the issuance of Apollo’s 6.75% Series A Mandatory Convertible Preferred Stock and related amendments to the company’s capitalization and security-holder rights. It does not provide operating results for a quarterly or annual reporting period.
Transaction and Key Financial Terms
- Apollo issued 28.75 million shares of Series A Mandatory Convertible Preferred Stock with an aggregate liquidation preference of approximately $1.438 billion, including 3.75 million shares issued upon full exercise of the underwriters’ over-allotment option.
- The offering was increased from the previously announced 20 million shares, or $1.0 billion aggregate liquidation preference.
- Net proceeds were approximately $1.402 billion, after underwriting discounts and before offering expenses.
- Each preferred share has a $50 liquidation preference and carries cumulative dividends at an annual rate of 6.75%, payable when declared by the board. Dividends may generally be paid in cash, common stock, or a combination, subject to specified limitations.
- Scheduled dividend payment dates are January 31, April 30, July 31 and October 31, commencing October 31, 2023, through July 31, 2026.
- Unless converted earlier, each preferred share is expected to convert automatically on July 31, 2026 into between 0.5052 and 0.6062 shares of common stock, subject to anti-dilution adjustments. The applicable rate will be based on the common stock’s 20-trading-day average volume-weighted average price before the mandatory conversion date.
- The preferred stock is not redeemable at Apollo’s option.
Material Changes and Rights
- The Certificate of Designations became effective upon filing with the Delaware Secretary of State on August 11, 2023.
- While preferred shares remain outstanding, Apollo is generally restricted from paying dividends or making repurchases on common stock or other junior securities unless accumulated preferred dividends have been paid or reserved for.
- If preferred dividends are unpaid for six or more dividend periods, the preferred holders, voting with any applicable parity securities, may elect two additional directors, subject to the terms of the Certificate of Designations.
- Holders may elect to convert all or part of their preferred stock before the mandatory conversion date. Early conversions generally use the minimum conversion rate, with potential adjustments for unpaid dividends.
- Upon a qualifying Fundamental Change, holders may receive an enhanced conversion rate and compensation for certain unpaid and remaining scheduled dividends.
- Upon liquidation, preferred holders rank ahead of common stock and are entitled to the $50 liquidation preference plus accumulated and unpaid dividends, subject to creditor and senior-security claims.
Outlook, Risks and Unusual Items
- The financing increases Apollo’s capital by approximately $1.4 billion net but introduces a cumulative preferred dividend obligation and potential future dilution of common stock.
- Dividend payments may be made in common stock in certain circumstances, which could increase share count and dilute existing common holders.
- The preferred stock’s liquidation preference ranks ahead of common stock, while payment remains subject to the company’s obligations to creditors and any senior securities.
- The filing contains no management guidance, operating outlook, revenue forecast, profit forecast, cash-flow forecast, margin data, debt metrics or liquidity analysis.
- The offering was conducted under Apollo’s Form S-3ASR registration statement and an underwriting agreement dated August 8, 2023, with Goldman Sachs, Morgan Stanley and Wells Fargo Securities serving as underwriter representatives.
Investor Verification Checklist
- Review the Certificate of Designations for the complete conversion-rate mechanics, anti-dilution provisions and Fundamental Change terms.
- Verify the timing and form of declared preferred dividends, including whether any dividends are paid in cash or common stock.
- Assess the potential common-stock dilution from mandatory or optional conversions through July 31, 2026.
- Determine how the approximately $1.402 billion of net proceeds were deployed and how the transaction affected Apollo’s consolidated debt and liquidity.
- Review subsequent filings for changes in preferred shares outstanding, dividend arrearages, conversion activity or director-election rights.