SCHEDULE 13D/A: Kingsway Financial Services Major Shareholder Group Updates Holdings, Grants Large Stock Option

A group of significant shareholders in Kingsway Financial Services Inc., including Oakmont Capital Inc. and key individuals, has updated its beneficial ownership to 10.36% and disclosed a new option agreement to sell 500,000 shares to David Capital Partners.

Summary

• The reporting group, consisting of Oakmont Capital Inc., E.J.K. Holdings Inc., 1272562 Ontario Inc., Terence M. Kavanagh, and Gregory P. Hannon, collectively beneficially owns 2,886,119 shares of Kingsway Financial Services Inc. common stock, representing approximately 10.36% of the outstanding shares as of April 9, 2025.
• This percentage is based on 27,537,151 shares outstanding as of March 17, 2025, plus 315,789 shares issuable from warrants and preferred share conversions.
• Key transactions include Oakmont's conversion of 13,142 Class A Preferred Shares into 82,144 common shares at US$4.00 per share on March 13, 2023.
• Oakmont also exercised 463,394 Series B Warrants to purchase an equal number of shares at US$5.00 per share on March 22, 2023.
• On March 23, 2023, EJK sold 6,000 shares at US$8.9601, while Mr. Kavanagh concurrently purchased 6,000 shares at US$9.0539 to consolidate his holdings. EJK no longer directly owns shares.
• Similarly, on March 23, 2023, 1272562 sold 3,000 shares at US$8.9125, and Mr. Hannon purchased 3,000 shares at US$8.9119 for consolidation, resulting in 1272562 no longer directly owning shares.
• Oakmont purchased 80,000 Class B Preferred Shares from Kingsway for US$2,000,000 on September 24, 2024, convertible into 210,526 common shares at US$9.50 per share.
• Oakmont further purchased 40,000 Class C Preferred Shares from Kingsway for US$1,000,000 on February 12, 2025, convertible into 105,263 common shares at US$9.50 per share.
• Oakmont entered into an option agreement on March 31, 2025, to sell 500,000 common shares to David Capital Partners Special Situation Fund, LP at an exercise price of US$8.25 per share, exercisable only on December 29, 2025.

Sentiment

Score: 6

Explanation: The document is a factual disclosure of ownership changes and transactions. The preferred share purchases represent a positive capital infusion for the company, while the option agreement provides potential liquidity for the reporting group. The overall sentiment is neutral to slightly positive due to the capital raise aspect, but it's primarily an informational update without strong positive or negative operational news.

Positives

• The group maintains a significant beneficial ownership stake of 10.36%, indicating continued commitment to Kingsway Financial Services Inc.
• Oakmont's recent purchases of Class B and Class C Preferred Shares from the Issuer (totaling US$3,000,000) demonstrate a direct investment into the company, providing capital to Kingsway.
• The consolidation of individual shareholdings by Mr. Kavanagh and Mr. Hannon into self-directed Retirement Savings Plans simplifies their personal investment structure.
• The option agreement with David Capital Partners Special Situation Fund, LP provides a potential future liquidity event for Oakmont at a pre-determined price of US$8.25 per share.

Negatives

• The sale of shares by EJK and 1272562, although offset by individual purchases by Mr. Kavanagh and Mr. Hannon, indicates a shift in direct ownership structure for those entities.
• Oakmont's open market sales in June 2023 were at average prices ranging from US$8.599 to US$8.879, which are higher than the US$8.25 exercise price of the newly granted option, suggesting a potential future sale at a lower price than recent market sales.

Risks

• The option agreement includes a clause regarding potential trading blackouts by the Company, which could delay the electronic delivery of shares and funds, requiring the use of an escrow agent.
• The document highlights that parties are aware of restrictions imposed by U.S. securities laws on trading with material, non-public information, implying a risk of non-compliance if not carefully managed.
• The option agreement states that Buyer (David Capital Partners) is entering the agreement 'notwithstanding the fact that an affiliate of Seller is currently a director of the Company and, as a result of such position or otherwise, Seller may have additional or different information, including material nonpublic information, regarding the Company or any of its affiliates,' which could pose a risk of information asymmetry or perceived insider trading if not handled with strict compliance.

Future Outlook

The reporting persons have no current plans or proposals for major corporate events concerning Kingsway Financial Services Inc., except for the potential exercise of an option by David Capital Partners Special Situation Fund, LP to acquire 500,000 shares from Oakmont Capital Inc. on December 29, 2025, at an exercise price of US$8.25 per share. This option includes provisions for adjustments based on corporate actions and handling of trading blackouts.

Industry Context

This Schedule 13D filing primarily details changes in beneficial ownership and related transactions by a significant shareholder group in Kingsway Financial Services Inc., a company operating in the financial services sector. The transactions, including preferred share purchases and an option agreement, reflect strategic investment and portfolio management decisions by the reporting group rather than broader industry trends or competitive dynamics.

Related Party Transactions

• Oakmont Capital Inc., E.J.K. Holdings Inc., 1272562 Ontario Inc., Terence M. Kavanagh, and Gregory P. Hannon are identified as a 'Reporting Persons' group, indicating their coordinated activities and shared beneficial ownership.
• The sales of shares by EJK and 1272562 and concurrent purchases by Mr. Kavanagh and Mr. Hannon, respectively, were described as consolidating holdings into self-directed Retirement Savings Plans, which are transactions between related parties within the reporting group.
• The purchases of Class B and Class C Preferred Shares by Oakmont from Kingsway Financial Services Inc. represent transactions between a significant shareholder (Oakmont, part of the reporting group) and the Issuer.
• The option agreement between Oakmont Capital Inc. and David Capital Partners Special Situation Fund, LP involves Oakmont, a member of the reporting group. The agreement notes that an affiliate of the Seller (Oakmont) is a director of the Company, highlighting a related party aspect in terms of information access.

Stakeholder Impact

• Shareholders: The filing provides transparency regarding the ownership structure and significant transactions by a major shareholder group. The preferred share purchases represent capital infusion, which could be seen as positive for the company's financial health. The option agreement introduces a new potential large shareholder (David Capital Partners) and a future block trade.
• Company (Kingsway Financial Services Inc.): Received US$3,000,000 in capital from Oakmont through preferred share sales.

Next Steps

• David Capital Partners Special Situation Fund, LP may exercise its option to purchase 500,000 shares from Oakmont Capital Inc. on December 29, 2025.
• If the option is exercised and a trading blackout is in effect, the parties will work with the Company to facilitate electronic delivery of shares and funds, potentially involving an escrow agent.

Key Dates

Keywords

Kingsway Financial Services Inc., SEC filing, Schedule 13D, beneficial ownership, Oakmont Capital Inc., David Capital Partners, stock option, preferred shares, warrants, share consolidation, corporate governance, investment, financial services