Hagerty, Inc. — Form 8-K Summary
Business Context and Reporting Period
Hagerty, Inc. filed this Current Report on June 23, 2023, reporting a private financing, related amendments to its governance and organizational documents, and a debt financing commitment. The filing does not report quarterly or annual operating results.
Key Transaction and Financial Terms
- Private placement: The company issued 8,483,561 shares of newly designated Series A Convertible Preferred Stock to accredited investors for aggregate proceeds of $80.0 million, or $9.43 per share. The transaction closed on June 23, 2023.
- Use of proceeds: Net proceeds are expected to be used for general corporate purposes.
- Preferred dividend: Series A Preferred Stock carries cumulative dividends at 7% annually on the purchase price plus previously accrued dividends, compounded annually. Dividends may be paid in cash or additional preferred shares.
- Conversion: Holders may convert at any time at an initial conversion price of $11.79 per share, subject to customary adjustments. The company may force conversion under specified stock-price and anniversary conditions.
- Liquidation and change-of-control rights: The preferred stock has a liquidation preference generally equal to the purchase price plus accrued dividends or the as-converted value, whichever is greater. Change-of-control redemption premiums may apply, including a 120% multiple through the third anniversary.
- Other redemption rights: Investors may have redemption rights in connection with qualifying acquisitions or financings of at least $500.0 million. The company may elect term redemptions beginning after the fifth anniversary, subject to specified premiums and value protections.
- Debt financing commitment: Hagerty Reinsurance Limited received a commitment from State Farm for an unsecured $25.0 million term loan facility. Funding remains subject to Bermuda Monetary Authority approval, definitive documentation, and other customary conditions.
- Registration rights: Investors received demand, shelf, and piggyback registration rights for the preferred stock and common shares issuable upon conversion.
Material Changes Versus the Prior Comparable Period
- The company created and issued a new class of Series A Convertible Preferred Stock, materially changing the capital structure and introducing a 7% cumulative preferred dividend obligation.
- The company amended and restated The Hagerty Group, LLC agreement to create corresponding preferred units held by Hagerty, Inc.
- The existing tax receivable agreement was amended to accommodate the preferred financing and related payments.
- The transaction creates potential future dilution to common stockholders if the preferred stock converts, as well as investor voting, veto, redemption, and liquidation rights.
- The filing text does not provide revenue, profit, cash flow, margin, existing debt, or liquidity figures for comparison with a prior period.
Guidance, Outlook, Risks, and Unusual Items
- Management disclosed no quantitative operating guidance or forecast in the provided filing text.
- The preferred securities vote with Class A common stock on an as-converted basis, and investors have veto rights over specified adverse amendments and issuances of securities senior to the Series A Preferred Stock.
- Accruing dividends may increase the company’s obligations over time if paid in additional preferred shares rather than cash.
- Future redemption obligations could require substantial cash payments upon a change of control, qualifying acquisition or financing, or company-elected term redemption.
- The $25.0 million debt facility is not yet definitive or funded based on the filing disclosure and remains subject to regulatory and other conditions.
- State Farm and Markel are significant stockholders and each has the right to nominate one director. Hagerty Holding Corp. has the right to nominate two directors, creating potential related-party and governance considerations.
- The securities were sold in an unregistered private placement under Section 4(a)(2) and Rule 506(b) of Regulation D and are restricted securities.
Investor Verification Checklist
- Verify the final closing and net proceeds received from the $80.0 million preferred placement.
- Review the Certificate of Designations for the complete conversion, dividend, redemption, voting, and liquidation provisions.
- Assess potential common-stock dilution using the initial $11.79 conversion price and accrued-dividend mechanics.
- Confirm whether State Farm’s $25.0 million debt commitment was ultimately approved, documented, and funded.
- Review the amended tax receivable agreement for potential future cash payment obligations.
- Examine subsequent filings for operating results, liquidity, preferred dividends, debt balances, related-party effects, and any conversion or redemption activity.