DEF 14C: FiscalNote Shareholders OK Convertible Debt, Reverse Split

FiscalNote Holdings, Inc. shareholders approved the potential issuance of over 19.99% of common stock to facilitate convertible debt financing and acknowledged a recent 1-for-12 reverse stock split.

Summary

• Shareholders approved two actions by written consent on September 4, 2025, to allow the company to issue more than 19.99% of its outstanding common stock, as required by NYSE rules.
• These approvals relate to a $25.4 million 7.50% Senior Subordinated Convertible Promissory Note (GPO Note) and up to $33.3 million in Convertible Debentures (YA II).
• The GPO Note, due November 13, 2029, has an initial conversion price of $82.92 per share and requires quarterly principal payments of $2 million starting April 1, 2026, payable in cash or Class A Common Stock.
• The Convertible Debentures allow conversion into Class A Common Stock at 94% of the lowest daily volume-weighted average trading price (VWAP) over five trading days prior to conversion, with a floor price of $0.8884 per share.
• The actions were approved by Consenting Stockholders holding approximately 66.9% of the company's total voting power.
• A 1-for-12 reverse stock split became effective on August 29, 2025, impacting all share and per share information.

Sentiment

Score: 3

Explanation: While the company successfully refinanced debt and secured new capital, the highly dilutive terms of the convertible debentures and the recent 1-for-12 reverse stock split indicate significant financial challenges and potential future pressure on the stock price.

Positives

• Secured financing through the GPO Note ($25.4 million) and Convertible Debentures (up to $33.3 million), which helps realign the balance sheet.
• Refinanced the senior credit facility with a new $75 million senior secured term loan, retiring previous senior term loan and certain subordinated convertible notes.
• Extended maturity of approximately $25.4 million in senior subordinated debt by issuing the GPO Note due November 13, 2029.

Negatives

• The need for shareholder approval for significant dilution (over 19.99%) suggests substantial potential future share issuance.
• The conversion terms for the YA II Convertible Debentures (94% of lowest daily VWAP, with a floor price of $0.8884) could lead to significant dilution at potentially low prices.
• A 1-for-12 reverse stock split, effective August 29, 2025, often indicates a company's stock price has fallen significantly and is a measure to maintain listing compliance or improve market perception, but does not address underlying business issues.

Risks

• Dilution Risk: Significant potential dilution for existing shareholders if the GPO Note and Convertible Debentures are converted into Class A Common Stock, especially given the terms of the Convertible Debentures.
• Stock Price Volatility: The conversion price mechanisms (e.g., 94% of lowest daily VWAP for debentures) can create incentives for convertible noteholders to short the stock, potentially increasing volatility and downward pressure.
• Debt Obligations: The company has new debt obligations, including a $75 million senior secured term loan and quarterly principal payments of $2 million on the GPO Note starting April 1, 2026.
• Floor Price Risk: If the daily VWAP falls below the Floor Price ($0.8884) for the Convertible Debentures, the company may be required to either make amortizing payments or further reduce the Floor Price, potentially exacerbating dilution or cash outflow.
• Regulatory Compliance: Failure to comply with NYSE listing rules could lead to delisting.

Future Outlook

The filing contains standard cautionary language regarding forward-looking statements, noting that actual results could differ materially from projections due to known and unknown risks and uncertainties. No specific forward-looking guidance or estimates are provided beyond the terms of the convertible notes and debt refinancing.

Management Comments

• We are not asking you for a proxy, you are requested not to send us a proxy and accordingly no proxy card has been enclosed with this Information Statement.
• Existing stockholders will retain their existing Common Stock.

Industry Context

This filing indicates FiscalNote is actively managing its capital structure, including refinancing debt and securing additional convertible financing. The need for a reverse stock split and the terms of the convertible debentures (e.g., conversion at a discount to VWAP, low floor price) suggest the company may be facing challenges in maintaining its stock price and accessing traditional equity financing. Such actions are common for companies seeking to shore up their balance sheets or extend debt maturities, particularly in a challenging economic environment or for growth-stage companies with high capital needs. The NYSE 19.99% rule compliance is a standard regulatory hurdle for significant capital raises involving equity dilution.

Comparison to Industry Standards

• The 1-for-12 reverse stock split is a significant capital event, often undertaken by companies whose stock price has fallen below minimum listing requirements or to improve market perception. While not uncommon, such a large ratio can signal underlying financial or operational challenges compared to industry peers with stable or appreciating stock values.
• The terms of the convertible debentures, specifically the conversion price at 94% of the lowest daily VWAP during the five trading days prior to conversion and a low floor price of $0.8884 per share, are generally considered unfavorable for existing shareholders. This structure is often seen in 'death spiral' financings, which can lead to substantial dilution and downward pressure on the stock price, contrasting with more favorable conversion terms (e.g., fixed premium to market price) seen in stronger companies.
• The 7.50% interest rate on the GPO Note, while senior subordinated, is relatively high, reflecting a higher risk profile compared to senior secured debt rates for more established, financially robust companies in the industry.
• The requirement for shareholder approval for issuances exceeding 19.99% of outstanding common stock is a standard NYSE listing rule, indicating that the company is adhering to corporate governance best practices for significant dilutive events, unlike private placements that might bypass such approvals.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential significant dilution from the conversion of the GPO Note and Convertible Debentures, especially given the unfavorable conversion terms for the latter. The reverse stock split impacts the number of shares held but not the total value immediately.
• Creditors (GPO, YA II): GPO receives a 7.50% senior subordinated convertible note and YA II receives convertible debentures, providing them with potential equity upside and debt repayment.
• Company: Improved balance sheet liquidity and extended debt maturities through refinancing and new capital, but at the cost of potential future equity dilution.

Next Steps

• The approved actions will become effective at least 20 calendar days after the Information Statement is mailed (on or about September 19, 2025).
• Company may issue Class A Common Stock in excess of the 19.99% limitation pursuant to the GPO Note and Convertible Debentures, if required.
• Quarterly installment payments of $2 million on the GPO Note begin April 1, 2026.

Key Dates

Recommendation

The combination of a 1-for-12 reverse stock split, which often signals severe stock price underperformance, and the highly dilutive terms of the YA II Convertible Debentures (conversion at 94% of lowest VWAP with a low floor price) presents significant downside risk for existing shareholders. While the company secured financing and refinanced debt, the cost of this capital, particularly the potential for substantial dilution at depressed prices, suggests a challenging outlook for equity value. Investors should consider selling to avoid further dilution and potential stock price erosion.

Keywords

FiscalNote Holdings, Convertible Debt, NYSE 19.99% Rule, Shareholder Approval, GPO Note, YA II, Reverse Stock Split, Debt Refinancing, Dilution, FN