Dave Announces Repurchase of $100 million Convertible Note from FTX for $71 million

Rhea-AI Summary

Dave Inc. (Nasdaq: DAVE) has announced an agreement with FTX Ventures Ltd. to purchase a convertible promissory note at a discounted price of $71 million, originally issued for $100 million. The agreement is subject to approval by the Bankruptcy Court and FTX not pursuing an alternative transaction. Jason Wilk, founder and CEO of Dave, expressed confidence in the capital allocation opportunity and the company's growth plan.

Insights

Financial Analyst

Acquiring a convertible promissory note at a discount can be a strategic move for Dave Inc. This transaction allows the company to potentially convert the debt to equity at a later date, which could be advantageous if the valuation of the underlying asset, in this case FTX, appreciates. The discounted purchase price of $71 million for a note with an original principal amount of $100 million indicates a significant markdown, which could suggest that Dave Inc. is capitalizing on FTX's distressed financial state to secure a deal that could be accretive to their balance sheet.

Moreover, the assurance from Dave's CEO about having sufficient capital post-transaction signals to investors that the company is in a stable financial position. However, the reliance on the Bankruptcy Court's approval and the absence of an alternative transaction introduces a level of uncertainty. Stakeholders should monitor the court's decision, as it will directly influence the completion of the deal and possibly Dave's capital structure going forward.

Legal Expert

The involvement of the Bankruptcy Court is a critical aspect of this deal. The court's approval is necessary for the transaction to proceed, ensuring that the agreement is in the best interest of FTX's creditors and aligns with bankruptcy laws. Additionally, the exclusivity condition preventing FTX from seeking alternative transactions for the sale of the note until the court hearing adds a layer of protection for Dave Inc. but also creates a temporal risk.

It is also worth noting that this transaction might set a precedent for similar future deals involving distressed assets. The outcome could influence how other companies in similar situations negotiate deals with entities in bankruptcy proceedings.

Market Research Analyst

Neobanks have been disrupting the traditional banking sector by leveraging technology to offer innovative financial services. Dave Inc.'s move to acquire a convertible note from a company undergoing bankruptcy proceedings is an aggressive strategy that could potentially provide them with a strategic advantage in the highly competitive fintech market. This acquisition might be seen as an opportunity to expand their market share or to acquire new technologies or customer bases associated with FTX.

However, the market's response to this transaction will depend on the perceived value of the convertible note and the long-term viability of FTX's assets. Stakeholders should consider the potential impact on Dave Inc.'s reputation and the broader market perception of investing in distressed assets.

LOS ANGELES, Jan. 5, 2024 /PRNewswire/ -- Dave Inc. ("Dave" or the "Company") (Nasdaq: DAVE), one of the nation's leading neobanks, today announced it has reached an agreement with FTX Ventures Ltd. ("FTX") to purchase a convertible promissory note that it previously issued to FTX in the original principal amount of $100 million, for a discounted purchase price of $71 million. FTX filed a motion in its bankruptcy proceeding seeking approval of the agreement, which is scheduled to be heard on January 25, 2024.

The closing of the transaction is conditioned upon the Bankruptcy Court's approval of the agreement and upon FTX not entering into an alternative transaction for the sale of the convertible note. 

"We believe the transaction represents a compelling capital allocation opportunity for Dave. Accounting for the payment, we remain confident that we have sufficient capital to execute on our growth plan without the need to raise additional equity capital," said Jason Wilk, founder and CEO of Dave.

About Dave

Dave (Nasdaq: DAVE) is a leading U.S. neobank and fintech pioneer serving millions of everyday Americans. Dave uses disruptive technologies to provide best-in-class banking services at a fraction of the price of incumbents. Dave partners with Evolve Bank & Trust, a FDIC member. For more information about the company, visit: www.dave.com. For investor information and updates, visit: investors.dave.com and follow @davebanking on X.

Forward-Looking Statements

This press release includes forward-looking statements, which are subject to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as "feel," "believes," expects," "estimates," "projects," "intends," "should," "is to be," "remain," or the negative of such terms, or other comparable terminology and include, among other things, statements relating to Dave's capital allocation, projected capital needs and other statements about future events. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements contained herein due to many factors, including, but not limited to: the ability of Dave to compete in its highly competitive industry; the ability of Dave to keep pace with the rapid technological developments in its industry and the larger financial services industry; the ability of Dave to manage its growth as a public company; disruptions to Dave's operations as a result of becoming a public company; the ability of Dave to remediate material weaknesses in Dave's internal controls over financial reporting and maintain an effective system of internal control over financial reporting; the ability of Dave to protect intellectual property and trade secrets; changes in applicable laws or regulations and extensive and evolving government regulations that impact operations and business; the ability to attract or maintain a qualified workforce; level of product service failures that could lead Dave members to use competitors' services; investigations, claims, disputes, enforcement actions, litigation and/or other regulatory or legal proceedings; the possibility that Dave may be adversely affected by other economic, business, and/or competitive factors; and those factors discussed in Dave's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 13, 2023 and subsequent Quarterly Reports on Form 10-Q under the heading "Risk Factors," filed with the SEC and other reports and documents Dave files from time to time with the SEC. Any forward-looking statements speak only as of the date on which they are made, and Dave undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.

Investor Relations Contact
Sean Mansouri, CFA
Elevate IR
DAVE@elevate-ir.com 

Media Contact
Kira Sarkisian
press@dave.com 

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SOURCE Dave Inc.

FAQ

What did Dave Inc. announce regarding FTX Ventures Ltd.?

Dave Inc. announced an agreement to purchase a convertible promissory note from FTX Ventures Ltd. at a discounted price of $71 million, originally issued for $100 million.

What is the ticker symbol for Dave Inc.?

The ticker symbol for Dave Inc. is DAVE.

Who expressed confidence in the capital allocation opportunity and the company's growth plan?

Jason Wilk, founder and CEO of Dave, expressed confidence in the capital allocation opportunity and the company's growth plan.

When is the Bankruptcy Court's approval of the agreement scheduled to be heard?

The Bankruptcy Court's approval of the agreement is scheduled to be heard on January 25, 2024.

What is the original principal amount of the convertible promissory note?

The original principal amount of the convertible promissory note is $100 million.

What is the discounted purchase price of the convertible promissory note?

The discounted purchase price of the convertible promissory note is $71 million.