8-K: FOXO Technologies Designates New Preferred Stock Series for Acquisitions and Capital Raising

FOXO Technologies Inc. has designated a new Series E Cumulative Redeemable Secured Preferred Stock to be used as acquisition currency and for capital raising, aiming to fund growth without diluting common stockholders.

Summary

• FOXO Technologies Inc. filed an amendment to its Certificate of Incorporation on June 25, 2025, to authorize up to 4,000,000 shares of Series E Cumulative Redeemable Secured Preferred Stock.
• This new series of preferred stock has a stated liquidation preference of $25.00 per share.
• Holders are entitled to cumulative preferential cash dividends at 2.5% per annum and common stock dividends at 5.0% per annum, both paid semi-annually.
• The Series E Preferred Stock is non-voting and non-convertible.
• The company's obligation to pay dividends and liquidation payments for this series will be secured by the common stock of FOXO Acquisition Corporation, a wholly-owned subsidiary.
• The primary purpose of this new preferred stock is to serve as an acquisition currency and a capital raising security.
• FOXO intends to publicly list the Series E Preferred Stock with its own trading symbol at an appropriate time.

Sentiment

Score: 7

Explanation: The announcement is a proactive strategic move to enable future growth and capital raising, which is generally positive. However, the underlying need for such a financing mechanism and the company's history of losses introduce some caution. The non-dilutive aspect for common shareholders is a strong positive.

Positives

• Provides a new funding mechanism for acquisitions and capital raising.
• Management states the new preferred stock is "non-dilutive to common stockholders" for acquisitions, which could preserve common equity value.
• Aims to increase net revenues and cash flow through strategic acquisitions, potentially creating long-term value for stockholders.
• The preferred stock is secured by a wholly-owned subsidiary's common stock, offering some security to preferred holders.

Negatives

• The issuance of preferred stock introduces a new class of securities with preferential rights over common stock in liquidation and dividend payments.
• The cumulative nature of dividends means unpaid dividends accrue, increasing the company's liability.
• The security interest granted to preferred stockholders on FOXO Acquisition Corporation's stock could impact future flexibility related to that subsidiary.

Risks

• The company operates in competitive and highly regulated industries, which could impact its performance.
• Variations in operating performance across competitors or changes in laws and regulations could affect FOXO's business.
• The ability to implement business plans, forecasts, and other expectations is subject to uncertainties.
• The company's ability to obtain financing, despite the new preferred stock, remains a risk.
• FOXO has a history of losses and may not achieve or maintain profitability in the future.
• The success of the acquisition strategy, which the preferred stock is intended to fund, is not guaranteed.

Future Outlook

The company is actively pursuing its acquisition strategy and evaluating new opportunities, intending to use the newly designated Series E Preferred Stock as both an acquisition currency and a capital raising security. Management believes this non-dilutive funding mechanism will help increase net revenues and cash flow, creating long-term value for stockholders. The company also intends to publicly list the Series E Preferred Stock with its own trading symbol at an appropriate time.

Management Comments

• "We are excited about taking a critical step as FOXO continues to pursue its acquisition strategy and is actively engaged in efforts to close previously announced acquisitions as well as evaluate new opportunities."
• "The newly designated preferred stock will be used as both an acquisition currency and capital raising security."
• "We intend, at the appropriate time, to have the Series E Preferred Stock publicly listed with its own trading symbol."
• "We believe having a funding mechanism that is non-dilutive to common stockholders for the acquisition of attractive businesses gives us an opportunity to increase our net revenues and cash flow to create long-term value for our stockholders."

Industry Context

This move by FOXO Technologies, which operates subsidiaries in healthcare (hospital, behavioral health) and biotechnology, reflects a common strategy among growth-oriented companies, particularly those with a history of losses, to secure capital for expansion without immediately diluting common equity. The use of preferred stock as an "acquisition currency" is also a recognized method for M&A, allowing companies to conserve cash while pursuing strategic growth. This is particularly relevant in industries like healthcare and biotech, which often require significant capital for expansion and R&A.

Comparison to Industry Standards

• The use of preferred stock as an acquisition currency and capital raising tool is a standard financial strategy employed by companies, particularly those seeking growth or facing capital constraints, to raise funds without immediate common stock dilution.
• The dividend structure (cash and stock dividends) and liquidation preference are typical features of preferred stock, designed to attract investors seeking yield and preferential treatment over common stockholders.
• The stated liquidation preference of $25.00 per share is a common par value for preferred stock, often used to facilitate public trading.
• The security interest granted over a subsidiary's stock is a common enhancement for preferred securities, providing additional collateral to investors, similar to how other companies might secure debt or preferred equity with specific assets or subsidiaries.

Corporate Governance

Stakeholder Impact

• Shareholders (Common Stockholders): Potentially positive as the new preferred stock is intended to be "non-dilutive" for acquisitions, preserving their equity stake while enabling growth. However, preferred stock has senior claims on assets and dividends.
• Potential Investors (Preferred Stockholders): Attractive due to cumulative cash and stock dividends, a stated liquidation preference, and a security interest in a subsidiary's stock.
• Creditors: The new preferred stock ranks junior to any senior debt but senior to common equity in liquidation. The security interest on a subsidiary's stock could affect assets available to unsecured creditors.
• Management: Provides a new tool for executing the company's strategic acquisition and growth plans.

Next Steps

• FOXO Technologies Inc. will continue to pursue its acquisition strategy.
• The company is actively engaged in efforts to close previously announced acquisitions.
• FOXO will evaluate new acquisition opportunities.
• The company intends to have the Series E Preferred Stock publicly listed with its own trading symbol at an appropriate time.
• A Security Agreement will be entered into by the Company prior to the issuance of any shares of Series E Preferred Stock to secure the obligations.

Key Dates

Recommendation

Keywords

FOXO Technologies, Series E Preferred Stock, Preferred Stock, Capital Raise, Acquisition Currency, Corporate Governance, SEC Filing, Form 8-K, Non-dilutive financing, Dividends, Liquidation Preference, FOXO Acquisition Corporation