SCHEDULE: Legion Partners Adjusts NN Inc. Stake

Legion Partners reports a shift in its holdings of NN Inc. securities, including the sale of cash-settled total return swaps and common stock, impacting its overall beneficial ownership percentage.

Summary

• Legion Partners, through various entities including Legion Partners L.P. I, II, XI, and Holdings, has filed an amendment to its Schedule 13D regarding its holdings in NN Inc.
• The filing details transactions within the past sixty days, primarily involving the sale of common stock and cash-settled total return swaps.
• Specifically, Legion Partners L.P. I sold cash-settled total return swaps totaling 134,423 notional shares at an average price of $2.4118.
• Legion Partners L.P. II also sold cash-settled total return swaps, amounting to 13,750 notional shares at $2.4118.
• Legion Partners Special Opportunities, L.P. XI sold 18,782 shares of common stock at an average price of $2.4118.
• The aggregate beneficial ownership percentage for Legion Partners, LLC and Legion Partners Asset Management, LLC is reported as 6.4%, representing 4,997,847 shares.
• Christopher S. Kiper and Raymond T. White, as managing directors/members of the reporting entities, also hold a beneficial ownership of approximately 6.4% of the outstanding shares.
• Following these transactions, Legion Partners L.P. I retains economic exposure to 2,623,434 notional shares (3.4% of outstanding shares) via swap agreements.
• Legion Partners L.P. II retains economic exposure to 233,225 notional shares (0.3% of outstanding shares) via swap agreements.
• Raymond T. White has been awarded 49,079 restricted shares as a director, vesting on March 18, 2027, with economic interests assigned to Legion Partners Asset Management.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as slightly negative due to the reported sales of securities by a significant investor, suggesting a potential reduction in their stake or hedging of existing positions.

Positives

• Legion Partners maintains a significant beneficial ownership stake of 6.4% in NN Inc., indicating continued strategic interest.
• The company has secured economic exposure through swap agreements, potentially allowing for participation in future stock performance.
• Director Raymond T. White has been granted restricted stock, aligning his interests with the company's long-term performance, though economic benefits accrue to Legion Partners Asset Management.

Negatives

• Significant sales of common stock and cash-settled total return swaps by Legion Partners entities suggest a reduction in direct equity holdings or a hedging strategy.
• The sale of 18,782 shares of common stock by Legion Partners Special Opportunities, L.P. XI indicates a decrease in direct ownership.
• The sale of cash-settled total return swaps by Legion Partners L.P. I and II reduces their direct economic exposure to the underlying shares.

Risks

• The sale of cash-settled total return swaps and common stock by Legion Partners could signal a lack of confidence or a strategic shift, potentially impacting investor sentiment.
• The complex structure of beneficial ownership and economic exposure through swaps and assigned director stock awards could create opacity for some investors.
• The weighted average sale price for securities ranged from $2.4000 to $2.5500, indicating potential downward pressure on the stock price if further sales occur within this range.

Future Outlook

The filing does not contain explicit forward-looking statements or guidance from NN Inc. However, the transactions by Legion Partners suggest a re-evaluation of their investment position, which could influence future share price movements.

Management Comments

• The Reporting Persons undertake to provide to the Issuer, any security holder of the Issuer or the staff of the Securities and Exchange Commission, upon request, full information regarding the number of securities sold at each separate price within the range set forth in this footnote.
• Mr. White serves on the Board as a representative of Legion Partners Asset Management and the Reporting Persons, he does not have a right to any economic interest in securities of the Issuer granted to him by the Issuer in respect of his Board position.
• As a result, Legion Partners Asset Management is entitled to receive all of the economic interests in securities granted to Mr. White by the Issuer in respect of Mr. White's Board position, for no consideration.

Industry Context

StockSavvy.ai notes that activist investors like Legion Partners often adjust their positions in response to company performance, strategic developments, or broader market conditions. The sale of swaps and stock in NN Inc. could indicate a shift in their assessment of the company's near-term prospects or a realization of gains.

Related Party Transactions

• Legion Partners Asset Management is entitled to receive all economic interests from restricted stock granted to director Raymond T. White, for which no consideration is paid.

Stakeholder Impact

• Shareholders may interpret the sales by Legion Partners as a signal of reduced confidence, potentially affecting share price.
• The ongoing economic exposure via swap agreements by Legion Partners I and II means they still have a vested interest in the company's performance.

Next Steps

• Legion Partners will provide detailed transaction information upon request from the Issuer, security holders, or the SEC.
• The economic interests from director stock awards granted to Raymond T. White will be received by Legion Partners Asset Management.

Key Dates

Recommendation

The filing indicates a reduction in direct holdings and hedging activities by a significant investor, Legion Partners. While this could be interpreted negatively, their continued substantial beneficial ownership and economic exposure via swaps suggest they are not exiting their position entirely. Therefore, a 'hold' recommendation is appropriate pending further information on Legion Partners' strategic intentions and NN Inc.'s operational performance.

Keywords

NN Inc, Schedule 13D, Legion Partners, Securities, Stock, Swap Agreements, Beneficial Ownership, SEC Filing, Amendment