Karat Packaging Inc. Announces Proposed Secondary Offering of Common Stock

Rhea-AI Summary

Karat Packaging (Nasdaq: KRT) announced a proposed secondary offering of 1.5 million shares of common stock by certain management team members. The Selling Stockholders will grant underwriters a 30-day option to purchase an additional 225,000 shares. Notably, Karat will not receive any proceeds from this offering as it's not offering any shares directly. BofA Securities and William Blair & Company are serving as joint lead book-runners for the offering, which is being made through a shelf registration statement on Form S-3. The offering will be conducted via a prospectus supplement and accompanying prospectus filed with the SEC.

Positive

• None.

Negative

• Management team members selling 1.5 million shares indicates potential lack of confidence in future growth
• No proceeds will benefit the company as this is a secondary offering from insiders
• Additional 225,000 shares option could increase selling pressure on the stock

Insights

Financial Analyst

Management secondary offering of 1.5M shares signals potential insider selling concerns despite no dilution to existing shareholders.

This secondary offering announcement represents a significant insider selling event that warrants investor attention. Current management team members are collectively offering 1.5 million shares of common stock, with underwriters having an option for an additional 225,000 shares. While the company explicitly states it won't receive any proceeds, meaning this isn't a capital raise for corporate purposes, the selling by insiders could signal management's perspective on current valuation.

Secondary offerings by management typically raise questions about confidence in future growth prospects. Investors often interpret such moves as insiders capitalizing on favorable valuation or diversifying personal holdings. The timing and size of this offering relative to the company's total outstanding shares and typical trading volume will be crucial metrics to monitor.

It's important to note this transaction won't cause dilution for existing shareholders as no new shares are being created. The engagement of major underwriters (BofA Securities and William Blair) suggests institutional market participation, potentially providing orderly distribution. The offering is being conducted through a previously filed shelf registration statement, indicating this was a planned liquidity event rather than an urgent need for management to sell.

The market's reaction will likely depend on the pricing of the offering relative to current market prices and how well the company explains management's rationale for selling during upcoming investor communications.

CHINO, Calif., June 10, 2025 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) (“Karat” or the “Company”), a specialty distributor and manufacturer of disposable foodservice products and related items, today announced the commencement of a proposed underwritten public offering of 1,500,000 shares of Karat’s common stock by certain members of the Company’s management team (the “Selling Stockholders”). The Selling Stockholders will also grant the underwriter a 30-day option to purchase up to an additional 225,000 shares of Karat’s common stock offered in the offering from the Selling Stockholders.

Karat is not offering any shares of its common stock in this offering and will not receive any proceeds from the sale of shares by the Selling Stockholders.

BofA Securities and William Blair & Company, L.L.C. are acting as the joint lead book-runners for the offering.

The offering of these securities is being made pursuant to a shelf registration statement on Form S-3 (File No. 333-286011), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 21, 2025 and declared effective on March 28, 2025. The offering will be made only by means of a prospectus supplement and an accompanying prospectus as filed with the SEC. A copy of the prospectus and prospectus supplement relating to the offering may be obtained, when available, by visiting the SEC’s website at www.sec.gov. Alternatively, copies of the prospectus and prospectus supplement relating to the offering may be obtained by contacting BofA Securities, Attention: Prospectus Department, NC1-022-02-25, 201 North Tryon Street, Charlotte, NC 28255-0001, or by e-mail at dg.prospectus_requests@bofa.com; or William Blair & Company, L.L.C., Attention: Prospectus Department, 150 North Riverside Plaza, Chicago, IL 60606, or by calling (800) 621-0687, or emailing prospectus@williamblair.com.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any offer or sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

About Karat Packaging Inc.

Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of disposable foodservice products and related items, primarily used by national and regional restaurants and in foodservice settings throughout the United States. Its products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. The Company’s eco-friendly Karat Earth^® line offers quality, sustainably-focused products that are made from renewable resources. Karat Packaging also offers customized solutions, including new product development and design, printing, and logistics services. To learn more about Karat Packaging, please visit the company’s website at www.karatpackaging.com.

Forward Looking Statements

Statements made in this release that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the proposed offering. We caution readers that forward-looking statements are predictions based on our current expectations about future events, and are subject to risks and uncertainties. Our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including the risks discussed under the heading “Risk Factors” discussed under the caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K or any updates discussed under the caption “Item 1A. Risk Factors” in Part II of our Quarterly Reports on Form 10-Q and in our other filings with the SEC, including the prospectus supplement to be filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, in connection with this offering. The forward-looking statements included in this press release are made only as of the date hereof and are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date, except as required by law.

Investor Relations and Media Contact

PondelWilkinson Inc.
Judy Lin or Roger Pondel
310-279-5980
IR@karatpackaging.com

FAQ

What is the size of Karat Packaging's (KRT) secondary stock offering in 2025?

The secondary offering consists of 1.5 million shares of common stock, with an additional 30-day option for underwriters to purchase up to 225,000 more shares.

Will Karat Packaging (KRT) receive any proceeds from the 2025 secondary offering?

No, Karat Packaging will not receive any proceeds from this offering as the shares are being sold by management team members (Selling Stockholders).

Who are the underwriters for Karat Packaging's (KRT) 2025 secondary offering?

BofA Securities and William Blair & Company are acting as the joint lead book-runners for the offering.

What is the purpose of Karat Packaging's (KRT) secondary offering in 2025?

The offering allows certain members of the company's management team to sell their shares of common stock through a registered public offering.

How can investors participate in Karat Packaging's (KRT) secondary offering?

Investors can access the prospectus and prospectus supplement through the SEC's website or by contacting the underwriters BofA Securities and William Blair & Company directly.