Form 4: Construction Partners Director Enters Prepaid Variable Share Forward Contract

Ned N. Fleming, III, a director and 10% owner of Construction Partners, Inc., entered into a prepaid variable share forward contract involving 300,000 shares of Class B common stock.

Summary

• On May 29, 2024, NNFIII ROAD, LLC ('NNFIII'), controlled by Ned N. Fleming, III, entered into a prepaid variable share forward contract (the 'Contract') with an unaffiliated third-party buyer.
• The contract involves 300,000 shares of Class B common stock of Construction Partners, Inc.
• The contract is divided into seven components, with settlement dates between June 5, 2025, and June 13, 2025.
• NNFIII has the option to deliver either shares of Class A common stock or a cash payment based on the contract terms.
• NNFIII received a cash payment in exchange for assuming the obligation to deliver shares or cash.
• NNFIII pledged 300,000 shares of Class B common stock to secure its obligations under the contract but retains dividend and voting rights during the term of the pledge.
• The number of shares or cash amount to be delivered is determined based on the volume-weighted average price of Class A common stock on the relevant valuation date.
• The settlement can be physical (delivery of shares) or cash-based, depending on the Settlement Price relative to the Forward Floor Price and Forward Cap Price specified in the contract.

Sentiment

Score: 5

Explanation: The sentiment is neutral as it reports a financial transaction. The impact on the company is unclear without knowing the specific terms of the contract and the motivations of the reporting person.

Positives

• The contract allows NNFIII to receive an upfront cash payment.
• NNFIII retains dividend and voting rights in the pledged shares during the contract term.

Negatives

• NNFIII is obligated to deliver shares or cash based on the contract terms, which could be unfavorable depending on the future stock price.
• 300,000 shares of Class B common stock are pledged as collateral.

Risks

• The value of the shares delivered or cash paid could be significantly affected by fluctuations in the price of Construction Partners, Inc.'s Class A common stock.
• The terms of the contract could result in NNFIII delivering a significant number of shares if the stock price appreciates substantially.
• There is a risk that the counterparty to the contract could default, although this is mitigated by the collateralization of the contract.

Future Outlook

The future obligation of NNFIII to deliver shares or cash will depend on the performance of Construction Partners, Inc.'s Class A common stock between the valuation date and the settlement date.

Industry Context

Prepaid variable share forward contracts are often used by corporate insiders to monetize their holdings while retaining some potential upside and deferring tax liabilities. The use of such contracts can be viewed as a way to manage personal liquidity and diversify investment portfolios.

Comparison to Industry Standards

• Similar transactions are common among executives and major shareholders of publicly traded companies.
• These contracts are often structured to allow the insider to monetize a portion of their holdings without immediately triggering a taxable event or selling shares directly into the market.
• Comparable companies and executives often use similar strategies to manage their personal finances and holdings in company stock.

Stakeholder Impact

• The transaction could have a minor impact on shareholders if the shares are ultimately delivered to the buyer, potentially diluting existing shareholders.
• The impact on employees, customers, suppliers, and creditors is likely to be minimal.

Key Dates