FAT Brands Warrant Holders: Key Updates and Considerations Ahead of Twin Hospitality Spin-Off

FAT Brands Inc. (NASDAQ: FAT) has recently provided an update to warrant holders in connection with the upcoming spin-off of Twin Hospitality Group Inc. (Twin Hospitality), which operates the Twin Peaks and Smokey Bones restaurant brands. The spin-off, expected to be completed on January 29, 2025, will result in FAT Brands' common stockholders receiving shares of Class A Common Stock (Twin Common Stock) of Twin Hospitality on a pro-rata basis. Here's a breakdown of the key updates and considerations for warrant holders:



1. Adjustment of Warrant Exercise Price:
- The exercise price of FAT Brands' outstanding warrants (NASDAQ: FATBW) will be adjusted downward following the record date (January 27, 2025) by an amount equal to the fair market value of the distributed shares of Twin Common Stock divided by the sum of all shares of Class A Common Stock outstanding on the record date plus the number of unexercised Warrants on the record date, but not below zero.
- This adjustment will likely make the warrants more valuable, as the exercise price will be lower, making it more attractive for warrant holders to exercise their warrants.

2. Warrant Exercise Considerations:
- Warrant holders who wish to receive the distribution of Twin Common Stock are reminded to exercise their Warrants for Class A Common Stock in advance of the record date.
- Warrants that are not exercised prior to the record date will not receive the distribution of Twin Common Stock but will have their exercise price adjusted downward under the warrant agency agreement.
- Warrant holders should consider exercising their warrants if they believe the value of the Twin Common Stock will be greater than the adjusted exercise price. Alternatively, they may choose to hold their warrants or sell them before the record date if they believe the value of the warrants will decrease after the adjustment.

3. Tax Implications for FAT Brands Stockholders:
- FAT Brands stockholders who receive shares of Twin Common Stock as part of the special stock dividend will face potential tax implications, including capital gains tax upon the sale of Twin Common Stock and dividend tax on any distributions received from Twin Hospitality.
- Stockholders should consult with their financial and tax advisors to better understand the specific consequences of the special dividend and the implications of buying or selling shares of either company on or before the distribution date.

4. Spin-Off Impact on FAT Brands' Valuation and Future Growth Prospects:
- The spin-off of Twin Hospitality will reduce FAT Brands' market capitalization by approximately 5%, which could lead to a decrease in FAT Brands' stock price. However, the spin-off may also create value for FAT Brands' shareholders by unlocking the intrinsic value of Twin Hospitality.
- Investors should consider the potential impact on FAT Brands' overall growth prospects and cash flow generation following the spin-off. The spin-off allows Twin Hospitality to operate as an independent public company, which may lead to improved operational efficiency and increased focus on its core brands, potentially creating synergies with FAT Brands' remaining brands.

In conclusion, FAT Brands warrant holders should carefully consider the implications of the warrant exercise price adjustment and the potential tax implications of receiving shares of Twin Common Stock as part of the special stock dividend. Additionally, investors should evaluate the potential impact of the spin-off on FAT Brands' valuation and future growth prospects. By staying informed and consulting with financial and tax advisors, warrant holders can make well-informed decisions regarding their investments in FAT Brands and Twin Hospitality.