Teamshares raises $225 million from T. Rowe Price accounts, at a 16% dividend it must pay in cash or stock

Teamshares, the Nasdaq-listed company that buys small and midsize businesses from retiring owners, said on Wednesday it has closed a $225 million preferred stock sale to accounts advised by T. Rowe Price Investment Management. The company's release says the money will mainly go toward buying more companies. The announcement came after the close. TMS shares had finished the regular session at $8.50, up 3.2%, and Nasdaq put the company's stock market value at about $626 million.

The release calls the money "non-dilutive," and that part is accurate: the new Series A preferred cannot be converted into common stock and carries no vote. What the release describes only briefly is the cost. The full terms are in the Form 8-K.

The number behind the $225 million

The $225 million is face value. Teamshares sold 225,000 shares at $990 each, so the cash it actually received was $222.75 million. Each share carries a $1,000 liquidation preference, the amount holders are owed ahead of common shareholders.

The preferred pays a cumulative dividend of 16% a year if Teamshares pays in cash, or 18% if it pays in additional preferred stock, a choice known as paying in kind. On $225 million, 16% comes to $36 million a year, or $9 million a quarter. The rate steps down to 14.5% in cash, about $32.6 million a year, once the company passes tests on EBITDA, leverage and fixed-charge coverage. The filing does not say where those thresholds are set.

For scale, CEO Michael Brown said in the release that the company has signed letters of intent beyond the $30 million of EBITDA under LOI it disclosed on its last earnings call. The full cash dividend on the preferred is larger than that EBITDA figure. The company's case is that the preferred will be blended with cheaper senior acquisition loans and seller notes, and that the businesses it buys will earn more than the combined cost of that financing. That can work, but only if the deals close at the prices and returns management expects.

Paying in kind avoids the cash bill but makes the claim grow. At 18% a year, compounding quarterly, a company that paid every dividend in stock for seven years would owe holders about $770 million in liquidation preference, more than three times the original amount. That is our calculation from the filing's terms, not a company projection, and the company can redeem the shares early.

The terms that matter later

• Year seven: a majority of holders can require Teamshares to redeem the preferred at any time from the seventh anniversary. Perpetual preferred usually never has to be paid back, but this one effectively has a seven-year put.
• Calling it early: redemption in the first two years requires a make-whole premium, then 102%, 101% and 100% of the liquidation preference over the next three years.
• Cash floor: Teamshares must hold at least $150 million of unrestricted cash until it refinances or repays its existing credit facility. Much of the new money therefore has to stay in the bank for now.
• More to come: the company can sell up to another $75 million of the same preferred to other investors. If it gives any of them better terms, T. Rowe's accounts receive the same terms.
• Related party: the 8-K says the buyers are affiliates of a holder of more than 10% of Teamshares' common stock.

The release's list of risk factors also includes "our ability to continue as a going concern" and the company's ability to refinance or extend its existing credit facilities. Those are standard disclosures, but they show the preferred was raised by a company that still has a refinancing to complete after its recent public listing.

Who it actually hits

Teamshares says it buys companies with $0.5 million to $5 million of EBITDA and sees more than 15,000 businesses of that size for sale each year through its software. Its subsidiaries had more than $500 million of revenue over the 12 months to June 30, across over 40 industries in 30 states. So the people most affected are owners of profitable, established small companies who are close to retiring and looking for a buyer.

For them, the capital structure has a practical side. Teamshares says it pairs its own capital with seller notes, which means the retiring owner lends the buyer part of the price. The new preferred ranks below all debt, so a seller note would sit ahead of it. More preferred capital puts more money ranked behind the seller. It also puts a 16% annual cost on top of the business, and meeting that cost depends on the businesses Teamshares buys, including the seller's.

Sources: Teamshares Inc. Form 8-K and Exhibit 99.1 press release (SEC EDGAR, Sept 23, 2026); Nasdaq. Annual dividend cost, compounded liquidation preference and comparisons calculated by The Company Chronicle from the filed terms. This is market information, not investment advice.