OPFI.NYSEOppfi INC
SCHEDULE 13D/A: OppFi Inc. Founders Maintain Significant Control and Beneficial Ownership Through Complex Share Structure
Sentiment:
Beneficial Ownership Amendment
An amended Schedule 13D filing reveals that Todd G. Schwartz and Theodore G. Schwartz, along with their affiliated entities, collectively maintain over 72% beneficial ownership and significant voting power in OppFi Inc. through a dual-class share structure and various agreements.
Summary
- This Amendment No. 2 to Schedule 13D updates the beneficial ownership of OppFi Inc. by Todd G. Schwartz, Theodore G. Schwartz, and their associated entities, including TGS Revocable Trust, OppFi Shares, LLC (OFS), TGS Capital Group, LP, TGS MCS Capital Group LP, LTHS Capital Group LP, and LTHS Revocable Trust.
- Todd G. Schwartz beneficially owns an aggregate of 62,723,873 shares, representing 72.6% of the combined Class A Common Stock and Class V Voting Stock.
- Theodore G. Schwartz beneficially owns an aggregate of 25,024,768 shares, representing 29% of the combined Class A Common Stock and Class V Voting Stock.
- The ownership percentages are based on 24,226,696 shares of Class A Common Stock and 62,178,190 shares of Class V Voting Stock outstanding as of March 7, 2025, as reported in the Issuer's Annual Report on Form 10-K filed on March 11, 2025.
- The beneficial ownership largely stems from the Business Combination completed on July 20, 2021, where FG New America Acquisition Corp. (now OppFi Inc.) acquired Opportunity Financial, LLC.
- The Business Combination involved a total consideration of approximately $806,517,000, consisting of $91,646,050 in cash and 96,987,093 shares of newly authorized Class V Voting Stock.
- 25,500,000 Earnout Units, which were part of the initial consideration and subject to performance targets by July 20, 2024, were forfeited on July 21, 2024, as the targets were not satisfied.
- Since the initial Schedule 13D filing on July 30, 2021, 10,043,754 shares of Class V Voting Stock have been cancelled due to Exchange Rights exercised by Members other than Todd G. Schwartz or Theodore G. Schwartz.
- Additionally, 734,851 new shares of Class V Voting Stock were issued to OFS in connection with OppFi Inc.'s acquisition of equity interests in Bitty Holdings, LLC.
- TGS Revocable Trust and LTHS Revocable Trust have purchased Class A Common Stock in the open market since May 10, 2022, though no such transactions occurred in the sixty days prior to this filing.
- Theodore G. Schwartz received Class A Common Stock in settlement of Restricted Stock Units (RSUs) on November 16, 2022 (18,484 shares), June 8, 2023 (46,729 shares), and June 7, 2024 (72,196 shares), and received a new grant of 49,328 shares on June 5, 2024, which will vest on the earlier of its one-year anniversary or the next annual meeting.
Sentiment
Score: 6
Explanation: The document is primarily factual and disclosure-oriented, detailing ownership structure and related agreements. The forfeiture of earnout units is a negative, but the continued strong insider ownership and open market purchases by trusts indicate confidence. The overall sentiment is neutral to slightly positive due to insider commitment, balanced by the earnout forfeiture and potential TRA liabilities.
Positives
- The continued significant beneficial ownership by key founders Todd G. Schwartz (72.6%) and Theodore G. Schwartz (29%) demonstrates strong insider alignment and commitment to the company's long-term success.
- Open market purchases of Class A Common Stock by TGS Revocable Trust and LTHS Revocable Trust since May 2022 indicate confidence in the Issuer and its strategy by significant shareholders.
- The issuance of 734,851 new Class V Voting Stock shares to OFS in connection with the acquisition of equity interests in Bitty Holdings, LLC suggests strategic growth initiatives.
Negatives
- The forfeiture of 25,500,000 Earnout Units on July 21, 2024, due to the non-satisfaction of Earnout Targets, indicates that certain performance milestones set during the Business Combination were not met.
Risks
- The Tax Receivable Agreement (TRA) obligates the Issuer to pay 90% of certain tax savings to the Members, which could represent a significant future cash outflow for the company.
- Acceleration clauses within the TRA, triggered by events such as early termination, change of control, material breach, or non-payment, could require the Issuer to make a substantial lump-sum cash payment, potentially impacting liquidity.
- The dual-class share structure, with Class V Voting Stock held by founders and related entities, concentrates significant voting power, potentially limiting the influence of Class A common stockholders on corporate governance and strategic decisions.
Future Outlook
The document indicates that further exercises of Exchange Rights by Members would result in the disposition of additional shares of Class V Voting Stock. Theodore G. Schwartz also has a grant of 49,328 shares of Class A Common Stock that will vest on the earlier of the one-year anniversary of the grant date (June 5, 2024) or the next annual meeting of the Issuer. The Reporting Persons may, at any time, review, reconsider, and change their position or purpose, and may seek to influence management or the Board regarding the Issuer's business and affairs.
Management Comments
- Todd G. Schwartz serves as the Executive Chairman and Chief Executive Officer of the Issuer.
- The Reporting Persons other than Mr. Todd G. Schwartz are primarily involved in investment activities.
Industry Context
This Schedule 13D filing primarily concerns changes in beneficial ownership and related agreements for OppFi Inc., a company operating in the financial services sector, likely focusing on non-prime lending or fintech. The 'Up-C' structure is a common arrangement for companies that go public via a SPAC merger, allowing pre-IPO owners to retain tax advantages. The forfeiture of earnout units is a common risk in SPAC transactions where performance targets are set for founders/initial owners.
Comparison to Industry Standards
- The 'Up-C' structure adopted by OppFi Inc. is a common and accepted corporate governance model for companies that have gone public through a SPAC merger, such as SoFi Technologies, Inc. (SOFI) or Affirm Holdings, Inc. (AFRM), allowing for tax-efficient ownership for pre-IPO unitholders.
- The dual-class share structure, which grants disproportionate voting rights to founders (e.g., Class V Voting Stock), is a prevalent practice among technology and fintech companies, similar to Meta Platforms, Inc. (META) or Alphabet Inc. (GOOGL), designed to ensure long-term strategic vision and control by the founders.
- The inclusion of an Earnout provision in the Business Combination Agreement is a standard mechanism in M&A transactions, particularly SPACs, to align incentives and tie future payouts to performance milestones. The forfeiture of these units, as seen here, is a risk inherent to such structures if targets are not met, comparable to similar earnout failures in other SPAC deals.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Executive Chairman of the Board | NA | Todd G. Schwartz | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Chief Executive Officer | NA | Todd G. Schwartz | 2022-02-23 | Appointment by the Issuer. |
| Director | Various FGNA directors | Todd G. Schwartz | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | Theodore G. Schwartz | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | Jared Kaplan | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | Christina Favilla | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | Jocelyn Moore | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | David Vennettilli | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
| Director | Various FGNA directors | Greg Zeeman | 2021-07-20 | Appointment upon the Closing of the Business Combination. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Corporate Structure | The combined company is organized in an 'Up-C' structure following the Business Combination. | 2021-07-20 | This structure allows pre-IPO owners to retain tax advantages associated with direct ownership of the operating company, while providing public investors with shares in a publicly traded entity. |
| Governing Documents | The Issuer adopted its Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. | 2021-07-20 | These documents define the fundamental rules and governance framework of the company post-Business Combination. |
| Operating Agreement | The Third Amended and Restated Limited Liability Company Agreement of OppFi (OppFi A&R LLCA) was entered into, designating the Issuer as the sole manager of OppFi and establishing Exchange Rights. | 2021-07-20 | This agreement governs the operations of OppFi, the primary operating entity, and provides a mechanism for Class V Voting Stock holders to exchange their units for Class A Common Stock or cash, impacting the public float over time. |
| Shareholder Rights | The Investor Rights Agreement grants the Members' Representative (Todd G. Schwartz) the right to nominate five directors to the board, provides certain registration rights for shares, and imposes lock-up periods on certain shares. | 2021-07-20 | This agreement ensures significant influence of the founding members on the board composition and provides liquidity pathways for their shares, while lock-up periods prevent immediate dilution post-IPO. |
| Tax Agreement | The Tax Receivable Agreement (TRA) obligates the Issuer to pay Members 90% of certain tax savings realized from the Business Combination and subsequent exchanges. | 2021-07-20 | The TRA creates a future liability for the Issuer, potentially impacting its cash flow, but also provides a benefit to the original owners for tax attributes generated. |
Related Party Transactions
- The entire Business Combination itself was a transaction between FGNA and Opportunity Financial, LLC, whose members included the Reporting Persons.
- The issuance of Class V Voting Stock to OppFi Shares, LLC (OFS), which is wholly owned by TGS Revocable Trust (sole trustee Todd G. Schwartz), is a related party transaction.
- The OppFi A&R LLCA, Investor Rights Agreement, and Tax Receivable Agreement are all agreements between the Issuer and its related parties (Members, Members' Representative, etc.).
- The exercise of Exchange Rights by Members (including those related to the Reporting Persons) involves the exchange of OppFi Units for Class A Common Stock or cash with the Issuer.
- Open market purchases of Class A Common Stock by TGS Revocable Trust and LTHS Revocable Trust are transactions by entities related to the founders.
- The receipt of Restricted Stock Units (RSUs) and their settlement in Class A Common Stock by Theodore G. Schwartz in his capacity as a director is a related party compensation arrangement.
- The charitable donation of Class A Common Stock by Theodore G. Schwartz from LTHS Revocable Trust is a related party transaction.
Stakeholder Impact
- **Shareholders (Class A Common Stockholders)**: The dual-class structure and significant beneficial ownership by founders mean that Class A shareholders have limited voting power compared to the founders. The potential future exchanges of Class V Voting Stock for Class A Common Stock could lead to dilution of Class A shares. The Tax Receivable Agreement creates a future financial obligation that could impact the company's profitability and cash flow available to shareholders.
- **Management/Employees**: The continued leadership roles of Todd G. Schwartz (Executive Chairman and CEO) provide stability and continuity in management. RSU grants to directors like Theodore G. Schwartz align their interests with shareholder value.
- **Creditors**: The Tax Receivable Agreement's potential lump-sum payments upon certain events (e.g., change of control, material breach) could impact the company's liquidity and financial stability, which is relevant for creditors.
- **Customers/Suppliers**: The filing does not directly impact customers or suppliers, but the company's overall financial health and strategic direction, influenced by the governance structure, could indirectly affect its ability to serve customers or maintain supplier relationships.
Next Steps
- Further exercises of Exchange Rights by Members, which would result in the disposition of additional shares of Class V Voting Stock.
- Vesting of 49,328 shares of Class A Common Stock granted to Theodore G. Schwartz on the earlier of June 5, 2025, or the next annual meeting of the Issuer.
- Reporting Persons may review, reconsider, and change their position or purpose regarding their investment in OppFi Inc. and may seek to influence management or the Board.
Key Dates
| Date | Description |
|---|---|
| 2021-02-09 | Date of the Business Combination Agreement. |
| 2021-07-20 | Closing Date of the Business Combination, when FG New America Acquisition Corp. completed transactions to become OppFi Inc. and various agreements (Investor Rights Agreement, Tax Receivable Agreement) were entered into. |
| 2021-07-20 | Date RSUs issued to Theodore G. Schwartz vested. |
| 2021-07-30 | Date of the original Schedule 13D filing. |
| 2022-02-23 | Todd G. Schwartz was appointed Chief Executive Officer of the Issuer. |
| 2022-05-10 | Beginning date for open market purchases of Class A Common Stock by TGS Revocable Trust and LTHS Revocable Trust. |
| 2022-11-16 | Theodore G. Schwartz received 18,484 shares of Class A Common Stock in settlement of RSUs. |
| 2023-06-07 | Date RSUs issued to Theodore G. Schwartz vested. |
| 2023-06-08 | Theodore G. Schwartz received 46,729 shares of Class A Common Stock in settlement of RSUs. |
| 2024-06-05 | Date RSUs issued to Theodore G. Schwartz vested and date of new RSU grant of 49,328 shares. |
| 2024-06-07 | Theodore G. Schwartz received 72,196 shares of Class A Common Stock in settlement of RSUs. |
| 2024-07-20 | Deadline for achievement of Earnout Targets. |
| 2024-07-21 | Earnout Units were forfeited as targets were not satisfied. |
| 2024-07-23 | Date of Amendment No. 1 to the Original Schedule 13D. |
| 2024-12-04 | Theodore G. Schwartz made a charitable donation of 527,199 shares of Class A Common Stock previously held by LTHS Revocable Trust. |
| 2025-01-13 | 607,273 shares of Class V Voting Stock cancelled. |
| 2025-01-15 | 12,751 shares of Class V Voting Stock cancelled. |
| 2025-01-24 | 298,479 shares of Class V Voting Stock cancelled. |
| 2025-01-29 | 60,000 shares of Class V Voting Stock cancelled. |
| 2025-01-31 | 5,000 shares of Class V Voting Stock cancelled. |
| 2025-02-07 | 385,102 shares of Class V Voting Stock cancelled. |
| 2025-02-07 | 10,000 shares of Class V Voting Stock cancelled. |
| 2025-02-11 | 472,774 shares of Class V Voting Stock cancelled. |
| 2025-02-28 | 35,000 shares of Class V Voting Stock cancelled. |
| 2025-03-04 | 4,865 shares of Class V Voting Stock cancelled. |
| 2025-03-04 | 60,000 shares of Class V Voting Stock cancelled. |
| 2025-03-07 | Date for which outstanding share counts (Class A and Class V) were reported in the Issuer's 10-K. |
| 2025-03-11 | Date of event requiring filing of this statement (Issuer's Annual Report on Form 10-K filed). |
| 2025-03-12 | Date of filing of this Amendment No. 2 to Schedule 13D. |
Keywords
OppFi Inc., Schedule 13D, Beneficial Ownership, Class A Common Stock, Class V Voting Stock, Dual-Class Structure, Business Combination, Tax Receivable Agreement, Investor Rights Agreement, Earnout Units, SEC Filing, Corporate Governance, Insider Ownership, Share Structure
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