Form 4: Patriot National Bancorp CEO Converts Preferred Stock to Common Shares, Bolstering Stake

Steven Sugarman, President and CEO of Patriot National Bancorp, Inc., has converted his Series A Preferred Stock holdings into non-voting common stock, which is convertible into voting common stock, as part of a previously disclosed private placement and legal fee reimbursement.

Summary

• Steven Sugarman, President and CEO of Patriot National Bancorp, Inc. (PNBK), reported a change in beneficial ownership of the company's securities.
• On July 3, 2025, all issued and outstanding shares of Series A Preferred Stock automatically converted into shares of non-voting common stock, par value $0.01 per share, pursuant to the company's Amended and Restated Certificate of Incorporation.
• The Steven and Ainslie Sugarman Living Trust, for which Steven Sugarman and his spouse are trustees, acquired 19,167 shares of Series A Preferred Stock as part of a private placement completed on March 20, 2025.
• These 19,167 Series A Preferred shares were convertible into 1,533,333 shares of Voting Common Stock, purchased at a price of $0.75 per share, with a Series A Preferred Stock liquidation preference of $60 per share.
• Additionally, the Trust was issued 5,833 shares of Series A Preferred Stock as reimbursement for the Reporting Person's legal fees and expenses related to the private placement.
• These 5,833 Series A Preferred shares were convertible into 466,667 shares of Voting Common Stock.
• Following the conversion on July 3, 2025, the Trust beneficially owns 2,000,000 shares of Non-Voting Common Stock (1,533,333 from private placement + 466,667 from legal fee reimbursement).
• Each share of Non-Voting Common Stock is convertible into one share of Voting Common Stock, subject to a limitation that no holder can become the beneficial owner of more than 9.99% of the issued and outstanding voting securities of the Issuer.

Sentiment

Score: 7

Explanation: The document reports a significant insider transaction following a capital raise, indicating strong management commitment and a structured approach to financing, which is generally positive for investor confidence, despite the non-voting nature of the converted shares initially.

Positives

• The conversion reflects a significant insider commitment, as the CEO's trust now holds a substantial stake in the company's common stock.
• The private placement, which led to the initial acquisition of preferred stock, indicates successful capital raising for the company.
• The structure with non-voting common stock and a 9.99% beneficial ownership cap helps manage potential voting power concentration while allowing for capital infusion.

Negatives

• The issuance of Series A Preferred Stock as reimbursement for legal fees, convertible into 466,667 shares of Voting Common Stock, represents a non-cash expense that could lead to future dilution if converted to voting shares.

Risks

• The 9.99% beneficial ownership limitation on voting securities means that the full voting power of the converted shares may not be immediately realized by the Trust, potentially limiting the CEO's direct voting influence despite a large economic stake.
• Future conversion of the non-voting common stock into voting common stock could lead to dilution for existing voting common shareholders, although this is capped by the 9.99% limitation.

Future Outlook

The non-voting common stock held by the Trust is convertible into voting common stock on a one-for-one basis, subject to a 9.99% beneficial ownership limitation, indicating a potential future increase in the CEO's direct voting stake.

Industry Context

This transaction is typical for financial institutions seeking to raise capital through private placements, often involving preferred stock with conversion features, and demonstrates insider confidence in the company's future.

Corporate Governance

Related Party Transactions

• The Steven and Ainslie Sugarman Living Trust, for which Steven Sugarman (President and CEO) and his spouse are trustees, participated in the private placement and received shares as reimbursement for legal fees related to the private placement.

Stakeholder Impact

• Shareholders: Potential for future dilution if non-voting common stock converts to voting common stock, but also benefit from the capital raised through the private placement and increased insider alignment.
• Management (Steven Sugarman): Increased economic stake in the company through the conversion of preferred shares, aligning his interests more closely with common shareholders, albeit with a voting limitation.

Next Steps

• The non-voting common stock held by the Trust remains convertible into voting common stock, subject to the 9.99% beneficial ownership limitation.

Key Dates

Keywords

Patriot National Bancorp, PNBK, Steven Sugarman, Insider Transaction, Stock Conversion, Preferred Stock, Common Stock, Private Placement, Beneficial Ownership, SEC Form 4, Corporate Governance