8-K: Katapult Waives Proxy Filing, Adjusts Preferred Stock Dividend Terms

Katapult Holdings, Inc. entered into a waiver with its preferred stockholder, modifying proxy statement filing requirements and adjusting the dividend rate contingent on stockholder approval.

Summary

• Katapult Holdings, Inc. (KPLT) entered into a waiver agreement with HHCF Series 21 Sub, LLC, the sole holder of its Series A and Series B Convertible Preferred Stock, on November 13, 2025.
• The waiver removes the requirement for Katapult to file a preliminary proxy statement within ten (10) calendar days after the Initial Issue Date of the Preferred Stock.
• It stipulates that the Regular Dividend Rate, currently 18% per annum, will increase by one percent (1%) to 19% per annum if, and only if, the Requisite Stockholder Approval is not obtained by the date of the Company's first annual meeting of stockholders following the Initial Issue Date.
• The waiver explicitly foregoes any accumulation of this additional 1% dividend that would have occurred prior to the waiver.
• A proposal for stockholder approval regarding the issuance of common stock upon conversion of the Preferred Stock above the Ownership Limitation will be submitted, and a proxy statement will be filed with the SEC for this purpose.

Sentiment

Score: 4

Explanation: The waiver addresses a procedural delay and introduces a potential increase in financing costs if stockholder approval is not secured. While it provides flexibility, the underlying conditions suggest challenges in meeting initial timelines and a potential negative financial impact.

Positives

• The waiver provides Katapult with more flexibility by removing the immediate requirement to file a preliminary proxy statement within 10 days, potentially allowing more time for preparation.
• The waiver clarifies the conditions under which the dividend rate on preferred stock would increase, providing certainty to both the company and the preferred stockholder.

Negatives

• Failure to obtain Requisite Stockholder Approval by the first annual meeting will result in a 1% increase in the Regular Dividend Rate on the Series A and Series B Convertible Preferred Stock, raising it from 18% to 19% per annum, which would increase financing costs.
• The need for a waiver suggests potential challenges or delays in meeting original filing deadlines or obtaining immediate stockholder approval.

Risks

• Failure to obtain Requisite Stockholder Approval could lead to increased dividend costs on the preferred stock, impacting profitability and cash flow.
• The issuance of common stock upon conversion of the Preferred Stock above the Ownership Limitation, if approved, could lead to significant dilution for existing common stockholders.
• The company's ability to secure stockholder approval for the conversion of preferred stock is crucial to avoid higher dividend rates.

Future Outlook

The company plans to file a proxy statement with the SEC to solicit stockholder approval for the issuance of common stock upon conversion of the Preferred Stock above the Ownership Limitation. The future dividend rate on preferred stock is contingent on this approval.

Management Comments

• A proposal to approve the issuance of common stock upon conversion of the Preferred Stock above the Ownership Limitation (as defined in the Certificates of Designation) will be submitted to the Company’s stockholders for their consideration.
• The Company will file with the Securities and Exchange Commission (the SEC) a proxy statement to be used to solicit stockholder approval of such issuance.

Industry Context

This filing reflects a common practice in corporate finance where companies negotiate terms with significant investors, especially regarding preferred stock. The need for stockholder approval for conversion above certain limits is a standard governance requirement to protect existing shareholders from excessive dilution. The adjustment of dividend rates based on such approvals is a mechanism to incentivize timely corporate actions.

Comparison to Industry Standards

• The 18% (potentially 19%) dividend rate on preferred stock is relatively high, suggesting a higher risk profile for Katapult or specific financing needs. For comparison, typical preferred stock dividend rates for more stable companies might range from 5-10%. Companies like Peloton Interactive, Inc. or Carvana Co., which have faced significant financial challenges, have sometimes issued preferred stock with high dividend yields or complex conversion terms to secure capital.
• The requirement for stockholder approval for conversion above an "Ownership Limitation" is a standard corporate governance practice, similar to rules seen in companies like AMC Entertainment Holdings, Inc. when they sought to convert preferred equity units into common stock, aiming to prevent undue concentration of ownership or significant dilution without shareholder consent.
• The use of waivers to adjust filing deadlines is not uncommon, especially in complex financial transactions, and has been observed in various companies navigating intricate capital structures.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential dilution if the common stock conversion is approved. Increased dividend costs if stockholder approval is not obtained, which could impact future earnings available to common shareholders.
• Preferred Stockholders (HHCF Series 21 Sub, LLC): Benefits from the potential 1% dividend rate increase if stockholder approval is not met, providing a higher return on their investment.

Next Steps

• Katapult Holdings, Inc. will file a proxy statement with the SEC.
• The company will submit a proposal to its stockholders for approval of the issuance of common stock upon conversion of the Preferred Stock above the Ownership Limitation.
• The Regular Dividend Rate will increase by 1% if stockholder approval is not obtained by the first annual meeting following the Initial Issue Date.

Key Dates

Recommendation

The filing highlights a procedural adjustment and a potential increase in financing costs if stockholder approval for preferred stock conversion is not secured. While the waiver provides flexibility, the underlying conditions (high preferred dividend rate, need for stockholder approval for conversion) suggest ongoing capital structure management challenges. Investors should hold and monitor the outcome of the stockholder vote and the company's ability to manage its capital costs. The potential for increased dividend payments and future dilution warrants caution, but the immediate impact is primarily procedural.

Keywords

Katapult Holdings, KPLT, SEC Filing, 8-K, Preferred Stock, Convertible Preferred Stock, Dividend Rate, Stockholder Approval, Corporate Governance, Waiver Agreement, HHCF Series 21 Sub, Proxy Statement, Financial Reporting