SCHEDULE: Katapult Secures $65M Investment, Board Shake-Up

Sentiment:

Investor Ownership Update and Capital Raise 10 November 2025 5:02 PM

Katapult Holdings, Inc. received a $65 million investment from HHCF Series 21 Sub, LLC, involving convertible preferred stock and warrants, alongside significant board changes.

Delay expectedThe full conversion of preferred stock and exercise of warrants beyond 19.99% beneficial ownership is subject to "Requisite Stockholder Approval" from Katapult's stockholders.If "Requisite Stockholder Approval" is not obtained by the earlier of the Issuer's first annual or special meeting of stockholders following the Initial Issue Date and February 27, 2026, the preferred stock dividend rate will increase by 1%.The appointment of Daniel Easley as a Class III director is effective only immediately following the receipt of the Requisite Stockholder Approval.

Capital raiseHHCF Series 21 Sub, LLC purchased 35,000 shares of Series A Convertible Preferred Stock for $35,000,000.HHCF Series 21 Sub, LLC purchased 30,000 shares of Series B Convertible Preferred Stock for $30,000,000.Total gross proceeds to Katapult Holdings, Inc. from this capital raise amount to $65,000,000.The funds for this purchase were obtained by HHCF Sub through a Secured Promissory Note.

Summary

HHCF Series 21 Sub, LLC (and related entities) invested $65 million in Katapult Holdings, Inc.
The investment comprises $35 million from Series A Convertible Preferred Stock and $30 million from Series B Convertible Preferred Stock.
HHCF Sub also received warrants to purchase 646,264 shares of Common Stock for no consideration.
Currently, the reporting persons beneficially own 913,452 shares, representing 19.99% of Katapult's outstanding Common Stock.
Full conversion of preferred stock and exercise of warrants would result in HHCF Sub owning 6,121,064 shares, or 57.26% of the Common Stock, but this is contingent on "Requisite Stockholder Approval."
The preferred stock carries an initial annual dividend rate of 18%, decreasing to 12% after stockholder approval, with a potential 1% increase if approval is delayed past specific deadlines.
The investment includes a Director Nomination Agreement, allowing HHCF Sub to nominate up to three directors to Katapult's Board, with two initially appointed and one pending stockholder approval.
Three existing directors resigned, and three new directors were appointed, including Katapult's President.
Katapult's officers and directors have entered into support agreements to vote in favor of removing the ownership limitation.

Sentiment

Score: 6

Explanation: The capital raise provides much-needed funding for Katapult, which is a positive. However, the high dividend rate on preferred stock, significant potential dilution, and the contingency of stockholder approval for full conversion introduce considerable risks and costs for existing shareholders. The investor's strong influence on the board also signals a shift in control.

Positives

Katapult Holdings, Inc. secured $65,000,000 in gross proceeds through the issuance of convertible preferred stock, providing a significant capital injection.
The investment includes warrants for 646,264 shares of Common Stock, further aligning investor interests.
The Director Nomination Agreement allows for new strategic input on the Board of Directors.
Support agreements from existing officers and directors indicate internal alignment for obtaining the necessary stockholder approval.

Negatives

The preferred stock carries a high initial annual dividend rate of 18%, which could be a significant financial burden on the Issuer.
If "Requisite Stockholder Approval" is not obtained by the specified deadlines (earlier of first annual/special meeting or February 27, 2026), the dividend rate will increase by 1%.
The potential full conversion of preferred stock and exercise of warrants would result in substantial dilution, with HHCF Sub potentially owning 57.26% of the issued and outstanding Common Stock.
The Series B Convertible Preferred Stock ranks senior to Series A and Common Stock in liquidation and dividends, potentially disadvantaging existing common shareholders and Series A holders.
The preferred stock has a liquidation preference of $1,000 per share, increasing to 175% upon dissolution or change of control, which is a significant claim on assets.

Risks

Stockholder Approval Risk: The full conversion of preferred stock and exercise of warrants beyond 19.99% beneficial ownership is contingent on "Requisite Stockholder Approval" as per Nasdaq listing rules. Failure to obtain this approval limits the investor's full equity stake and could trigger an increased dividend rate.
Dividend Rate Increase: If the "Requisite Stockholder Approval" is not obtained by the earlier of the Issuer's first annual/special meeting or February 27, 2026, the dividend rate on the preferred stock will increase by 1%.
Dilution Risk: While contingent on stockholder approval, the potential conversion of preferred stock and exercise of warrants could lead to significant dilution for existing common stockholders, with HHCF Sub potentially owning 57.26% of the company.
Liquidation Preference: The preferred stock has a substantial liquidation preference ($1,000 per share, increasing to 175% upon certain events), which could impact common stockholders in a liquidation scenario.
Transfer Restrictions: HHCF Sub is restricted from transferring the preferred stock and underlying common stock for 12 months or until a Fundamental Change of Control, which could affect liquidity for the investor.

Future Outlook

The Reporting Persons acquired beneficial ownership for investment purposes and intend to review their investment regularly. They reserve the right to change their investment intent, acquire or dispose of additional securities, engage in proxy solicitations, propose extraordinary business transactions, or discuss the Issuer's operations and strategies with management or directors. Any actions will be consistent with the Investment Agreements, Certificates of Designations, and Director Nomination Agreement. The Issuer has agreed to file a registration statement covering the resale of shares of Common Stock issuable upon conversion of the Preferred Stock within 45 days.

Industry Context

This significant capital injection and board restructuring suggest a strategic move to stabilize or reposition Katapult Holdings, Inc., a company likely operating in the lease-to-own or e-commerce financing sector. The high preferred dividend rate indicates a potentially distressed or high-growth company seeking capital, where traditional debt might be unavailable or too restrictive. The investor's ability to nominate a majority of the board (post-approval) and the substantial potential ownership stake suggest a strong influence on the company's future direction, potentially signaling a turnaround effort or a strategic pivot.

Comparison to Industry Standards

The 18% preferred dividend rate is notably high, suggesting a higher risk profile for Katapult compared to companies that can secure financing at lower rates.
This rate is more akin to distressed debt or venture debt financing terms rather than typical public equity or investment-grade corporate debt.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director	Brian Hirsch	NA	2025-11-03	Resignation
Director	Chris Masto	NA	2025-11-03	Resignation
Director	Jane J. Thompson	NA	2025-11-03	Resignation
Class I Director	NA	Philip Key Bartow III	2025-11-03	Appointment by Board recommendation, part of Director Nomination Agreement
Class I Director	NA	Jeffrey Rubin	2025-11-03	Appointment by Board recommendation, part of Director Nomination Agreement
Class III Director	NA	Derek Medlin	2025-11-03	Appointment by Board recommendation (also President of Issuer)
Class III Director	NA	Daniel Easley	Upon Requisite Stockholder Approval	Appointment by Board recommendation, part of Director Nomination Agreement, contingent on stockholder approval

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment

Related Party Transactions

The filing details an investment by HHCF Sub, which, through the Director Nomination Agreement and potential majority ownership, becomes a significant related party.
The support agreements from officers and directors also represent related party dealings to facilitate the investment.

Stakeholder Impact

Shareholders: Existing common shareholders face significant potential dilution (up to 57.26%) if the "Requisite Stockholder Approval" is obtained. They also face the burden of high preferred stock dividends and the senior ranking of preferred stock in liquidation. The board changes could lead to a new strategic direction.
Creditors: The capital injection of $65 million could improve the company's financial stability, potentially benefiting existing creditors. However, the preferred stock's senior ranking and high dividend payments could impact the company's cash flow and ability to service other debts.
Employees: The capital raise and potential strategic shifts could lead to changes in company operations, potentially impacting employees through restructuring or new initiatives.
Customers/Suppliers: Improved financial health could lead to more stable operations, potentially benefiting customers and suppliers through continued business and reliable payments.

Next Steps

Katapult Holdings, Inc. stockholders need to vote on the "Requisite Stockholder Approval" to remove the 19.99% ownership limitation for HHCF Sub.
The Issuer is required to file a registration statement covering the resale of Common Stock issuable upon conversion of the Preferred Stock within 45 days following the closing of the Preferred Stock Issuances.
Daniel Easley's appointment as a Class III director will become effective upon receipt of the Requisite Stockholder Approval.

Key Dates

Date	Description
2023-03-06	Issuance date of warrants to purchase 160,000 shares of Common Stock with an exercise price of $0.25, expiring March 6, 2030.
2025-06-12	Issuance date of warrants to purchase 486,264 shares of Common Stock with an exercise price of $0.01, expiring June 12, 2032.
2025-06-30	End of quarterly period for which Katapult's Common Stock outstanding was reported in Form 10-Q.
2025-08-13	Date Katapult Holdings, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025.
2025-10-30	Date of Secured Promissory Note issued by HHCF Sub to BP Commercial Funding Trust III.
2025-10-31	Closing price for Common Stock used as a cap for conversion rate adjustment ($11.39).
2025-11-03	Initial Issue Date for Series A and Series B Investment Agreements, Director Nomination Agreement, Registration Rights Agreements, and Support Agreements. Also, the date warrants were assigned to HHCF Sub and the effective date of board changes.
2025-11-10	Date of the Joint Filing Agreement and the signing of this Schedule 13D.
2026-02-27	Deadline for obtaining Requisite Stockholder Approval before the preferred stock dividend rate increases by 1%.
2026-12-31	Latest possible date for the Issuer's 2026 annual meeting of stockholders, which impacts the preferred stock dividend rate.
2027-12-31	Approximate expiration of initial term for Class I directors Philip Key Bartow III and Jeffrey Rubin.
2028-12-31	Approximate expiration of initial term for Class III directors Derek Medlin and Daniel Easley.

Recommendation

hold

The $65 million capital injection is a critical lifeline for Katapult, addressing immediate funding needs. However, the terms of the investment, including the high 18% preferred dividend rate and the significant potential dilution (57.26%) contingent on stockholder approval, introduce substantial risks and costs for existing common shareholders. The investor's strong influence on the board and the senior ranking of the preferred stock suggest a shift in control and a potentially challenging path to profitability for common equity. Investors should hold to observe the outcome of the "Requisite Stockholder Approval" and the company's ability to manage the high dividend burden and execute on any new strategic direction under the new board composition. The long-term value for common shareholders remains highly uncertain given these terms.

Keywords

Katapult Holdings, convertible preferred stock, warrants, equity investment, Schedule 13D, stockholder approval, corporate governance, board changes, dilution, dividend rate, Nasdaq listing rules, HHCF Series 21 Sub

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.