SCHEDULE: Fund 1 Investments Boosts Funko Stake to 9.5%

Fund 1 Investments, LLC has increased its beneficial ownership in Funko, Inc. to 9.5% of outstanding Class A Common Stock, alongside significant derivative positions.

Summary

• Fund 1 Investments, LLC now beneficially owns 5,265,798 shares of Funko, Inc. Class A Common Stock.
• This represents approximately 9.50% of Funko's 55,444,604 outstanding shares as of March 10, 2026.
• The aggregate purchase price for these beneficially owned shares is approximately $41,909,408, including brokerage commissions.
• Fund 1 Investments, LLC also holds cash-settled total return swap agreements providing economic exposure to an additional 3,897,961 notional shares, representing approximately 7.03% of outstanding shares.
• Additionally, cash-settled call options referencing an aggregate of 2,736,830 notional shares are held, with various expiry dates in March, April, and May 2026, and exercise prices of $4.00 or $5.00 per share.
• The total economic exposure, combining direct shares, swaps, and options, amounts to approximately 11,900,589 notional shares, or about 21.46% of Funko's outstanding shares.
• Recent transactions by Fund 1 Investments, LLC include both purchases and sales of Funko common stock in early March 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a moderately positive development, as a substantial increase in an institutional investor's economic stake, including significant derivative positions, typically reflects confidence in the company's valuation or future performance.

Positives

• A significant institutional investor, Fund 1 Investments, LLC, is building a substantial economic position in Funko, Inc., indicating potential confidence in the company's future.
• The investor's total economic exposure, including direct shares and derivatives, represents over 21% of Funko's outstanding shares, suggesting a strong conviction in the company's prospects.

Negatives

• The filing indicates recent sales of common stock by Fund 1 Investments, LLC (two tranches of 250,000 shares each on March 11 and March 13, 2026), which could suggest some profit-taking or rebalancing of the position.
• The use of cash-settled swaps and call options, while providing economic exposure, does not grant voting rights for those notional shares, limiting direct influence on corporate governance for a significant portion of the economic interest.

Risks

• The substantial use of cash-settled derivatives (swaps and options) introduces counterparty risk with the unaffiliated third-party financial institution.
• The call options have specific expiry dates, and if Funko's stock price does not exceed the exercise prices ($4.00 or $5.00) by those dates, the options may expire worthless, leading to potential losses on those positions.
• The filing mentions that working capital for purchases "may, at any given time, include margin loans," which introduces leverage risk for the Reporting Person.

Future Outlook

The filing does not provide a future outlook for Funko, Inc. from the company's perspective. It details the current and derivative holdings of Fund 1 Investments, LLC, reflecting their investment strategy and economic interest in the issuer.

Industry Context

StockSavvy.ai notes that a significant increase in an institutional investor's stake, particularly through a combination of direct shares and derivatives, often signals a strong belief in the company's undervalued status or future growth potential. For a company like Funko, operating in the collectibles and pop culture merchandise industry, such an investment could be interpreted as a vote of confidence in its brand strength and market position, especially if the investor intends to engage with management or pursue strategic changes, though this filing does not explicitly state such intentions.

Stakeholder Impact

• Shareholders: The increased stake by Fund 1 Investments, LLC could be seen as a positive signal, potentially attracting other investors and influencing market perception. It also means a larger portion of the company's economic interest is concentrated with one institutional holder.
• Management: A significant investor holding a large economic stake may seek to engage with management regarding strategic direction or operational improvements, even without immediate voting control over all notional shares.

Next Steps

• The filing does not explicitly state any future actions or milestones by Fund 1 Investments, LLC beyond their current investment strategy. The expiry dates of the call options indicate potential future activity related to those positions.

Key Dates

Recommendation

While Fund 1 Investments, LLC is building a substantial economic position in Funko, indicating potential long-term confidence, the recent mixed activity (both purchases and sales of common stock) and the reliance on derivatives suggest a nuanced strategy. Investors should hold to observe further developments, including any activist intentions or changes in the company's fundamentals that might justify the investor's conviction.

Keywords

Funko Inc., FNKO, Fund 1 Investments, Schedule 13D, Beneficial Ownership, Class A Common Stock, Total Return Swaps, Call Options, Institutional Investor, SEC Filing