Hagerty Commences Warrant Exchange Offer and Consent Solicitation
Hagerty (NYSE: HGTY) has commenced an exchange offer and consent solicitation concerning its various warrants to simplify capital structure and reduce potential dilution. The Offer allows warrant holders to exchange each warrant for 0.20 shares of Class A Common Stock, with up to 3,896,707 shares available. Concurrently, the Consent Solicitation seeks to amend warrant agreements to enable compulsory exchange at 0.18 shares per warrant. The offering period concludes on July 2, 2024. Parties holding significant percentages of these warrants have agreed to the exchange and amendments.
- Hagerty aims to simplify its capital structure.
- Potential reduction in dilutive impact from warrants.
- Offer includes up to 3,896,707 shares of Class A Common Stock.
- Significant warrant holders have already agreed to the exchange and amendments.
- Exchange can lead to no warrants outstanding if all are tendered.
- The exchange will increase outstanding shares by approximately 4.5%, potentially diluting existing shareholders.
- The mandatory exchange ratio is 10% less favorable than the voluntary exchange ratio.
- Amendments require consent from additional public warrant holders, which might not be obtained.
- Additional shares issuance could impact stock price negatively.
Insights
From a financial perspective, Hagerty's warrant exchange offer is a notable move aimed at simplifying its capital structure and reducing potential dilution from its outstanding warrants. By offering 0.20 shares of Class A Common Stock for each warrant, the company incentivizes warrant holders to convert their warrants into shares. This move could lead to an issuance of up to 3,896,707 new shares, which represents a potential
Short-term implications: The exchange offer could result in a temporary increase in stock price volatility as warrant holders decide whether to accept the offer. Additionally, the potential increase in the number of shares could have a dilutive effect on existing shareholders. However, the streamlined capital structure could be viewed favorably by investors, potentially decreasing the perceived risk associated with the company's equity.
Long-term implications: The reduction in dilution risk and simplified capital structure could enhance Hagerty's attractiveness to new investors. Simplifying the capital structure often translates to better manageability and transparency, which can improve market confidence and potentially lower the cost of capital for future fundraising activities.
Investors should be aware that the exchange offer and consent solicitation require the consent of a certain percentage of warrant holders, which adds a layer of uncertainty. However, with already significant consent from existing warrant holders, the likelihood of this deal going through seems probable.
From a legal standpoint, the consent solicitation is a important facet of this offer. The requirement for amendments to the warrant agreements to gain consent from at least 50% of the Public and Private Placement Warrant holders introduces a hurdle that Hagerty will need to overcome. However, the company has strategically positioned itself by securing consents from
Such advanced consents suggest that Hagerty has managed to garner substantial preliminary support, indicating a strong likelihood that the necessary threshold will be met. Additionally, the offer to exchange at a ratio of
For retail investors, understanding these legal prerequisites can provide insights into the procedural robustness and potential timeline of the exchange offer’s completion. Investors should also consider the implications of the amended warrant agreements, which if passed, will simplify the legal obligations and financial forecasting for the company.
From a market research perspective, Hagerty's strategy to convert warrants and reduce dilution is a significant maneuver in enhancing shareholder value. The automotive enthusiast segment has unique market dynamics and clarity in capital structure can be particularly appealing to niche investors. Simplifying complex financial instruments like warrants can lead to greater transparency and trust among retail investors.
Additionally, Hagerty's ability to secure consents from a large proportion of different warrant types showcases effective communication and confidence-building with its stakeholders. This move is not just about financial restructuring but also about market perception, which can drive investor sentiment positively.
For retail investors, analyzing the company's successful preliminary consent and the specifics of the exchange offer can offer deeper understanding into Hagerty’s strategic foresight. The market's reaction to this simplification could be an indicator of the company’s future positioning and investor trust levels, which are critical in a niche market.
Exchange Offer and Consent Solicitation Relating to Warrants
The Company is offering to all holders of the Warrants the opportunity to receive 0.20 shares of Class A Common Stock (the "Shares") in exchange for each outstanding Warrant tendered by the holder and exchanged pursuant to the Offer. Pursuant to the Offer, the Company is offering up to an aggregate of 3,896,707 Shares in exchange for the Warrants.
Concurrently with the Offer, the Company is also soliciting consents from holders of the Warrants to amend the warrant agreement that governs the Public Warrants and the Private Placement Warrants (the "IPO Warrant Agreement") and the warrant agreement that governs the PIPE Warrants (the "Business Combination Warrant Agreement" and together with the IPO Warrant Agreement, the "Warrant Agreement") to permit the Company to require that each Warrant that is outstanding upon the closing of the Offer be exchanged for 0.18 Shares, which is a ratio
The Offer and Consent Solicitation are being made pursuant to a prospectus/offer to exchange, dated June 3, 2024 (the "Prospectus/Offer to Exchange"), and Schedule TO, dated June 3, 2024 (the "Schedule TO"), each of which have been filed with the
The Company's Class A Common Stock and Public Warrants are listed on The New York Stock Exchange under the symbols "HGTY" and "HGTY.WS," respectively. As of May 15, 2024, there were (i) 85,703,286 shares of Class A Common Stock outstanding, (ii) 8,483,561 shares of Series A Preferred Stock outstanding, (iii) 251,033,906 shares of Class V Common Stock issued and outstanding and (iv) a total of 19,483,539 Warrants were outstanding. Assuming all Warrant holders tender their Warrants for exchange in the Offer, the Company would expect to issue up to 3,896,707 Shares, resulting in 89,599,993 shares of Class A Common Stock outstanding (an increase of approximately
D.F. King & Co., Inc. has been appointed as the information agent and consent solicitor for the Offer and Consent Solicitation (the "Information Agent" and "Consent Solicitor") and Continental Stock Transfer & Trust Company has been appointed as the exchange agent (the "Exchange Agent").
Important Additional Information Has Been Filed with the SEC
Copies of the Schedule TO and Prospectus/Offer to Exchange will be available free of charge at the website of the SEC at www.sec.gov. Requests for documents may also be directed to the Information Agent at (888) 564-8149 (for Warrant holders) or (212) 269-5550 (for banks and brokers) or via the following email address: HGTY@dfking.com. A registration statement on Form S-4 (the "Registration Statement") relating to the Shares to be issued in the Offer has been filed with the SEC but has not yet become effective. The Shares may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective.
This announcement is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Warrants or an offer to sell or a solicitation of an offer to buy any Shares in any jurisdiction in which such offer, solicitation, or sale would be unlawful before registration or qualification under the laws of any such jurisdiction. The Offer and Consent Solicitation are being made only through the Schedule TO and Prospectus/Offer to Exchange, and the complete terms and conditions of the Offer and Consent Solicitation are set forth in the Schedule TO and Prospectus/Offer to Exchange.
Holders of the Warrants are urged to read the Schedule TO and Prospectus/Offer to Exchange carefully before making any decision with respect to the Offer and Consent Solicitation because they contain important information, including the various terms of, and conditions to, the Offer and Consent Solicitation.
None of the Company, any of its management or its board of directors, or the Information Agent, the Consent Solicitor or the Exchange Agent makes any recommendation as to whether or not holders of Warrants should tender Warrants for exchange in the Offer or consent to the amendments in the Consent Solicitation.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws, including statements regarding the expected timing and effect of the Offer and Consent Solicitation, and any other statement that is not historical fact. These forward-looking statements generally are identified by words such as "aim," anticipate," "expect," "intend," "future," "opportunity," "plan," "potential," "may," "should," "will," "would," and similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from these forward-looking statements, including the Company's ability to (i) compete effectively within its industry and attract and retain insurance policy holders and paid HDC subscribers; (ii) maintain key strategic relationships with its insurance distribution and underwriting carrier partners; (iii) prevent, monitor and detect fraudulent activity; (iv) manage risks associated with disruptions, interruptions, outages with its technology platforms or third-party services; (v) accelerate the adoption of its membership products as well as any new insurance programs and products; (vi) manage the cyclical nature of the insurance business including through any periods of recession, eco-nomic downturn or inflation; (vii) address unexpected increases in the frequency or severity of claims; (viii) comply with the numerous laws and regulations applicable to its business, including state, federal and foreign laws relating to insurance and rate increases, privacy, the internet and accounting matters; (ix) manage risks associated with being a controlled company; (x) successfully defend any litigation, government inquiries and investigations, and (xi) address other risks and uncertainties described under the section entitled "Risk Factors" in the Registration Statement and the other documents the Company files from time to time with the SEC, which are accessible on the SEC's website at www.sec.gov.
Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
About Hagerty, Inc. (NYSE: HGTY)
Hagerty is an automotive enthusiast brand committed to saving driving and to fueling car culture for future generations. The company is a leading provider of specialty vehicle insurance, expert car valuation data and insights, live and digital car auction services, immersive events and automotive entertainment custom made for the 67 million Americans who self-describe as car enthusiasts. Hagerty also operates in
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SOURCE Hagerty
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