Forms the Uncancellable Payment Ecosystem
for the Parallel Economy
Acquisition Expected to be Immediately Cash
Flow Accretive to PublicSquare
PSQ Holdings, Inc. (NYSE: PSQH) (“PublicSquare,” or the
“Company”), a leading marketplace of patriotic businesses and
consumers, and Credova Holdings, Inc. (“Credova”), a point-of-sale
financing platform providing Buy Now Pay Later (BNPL) solutions
catered to the shooting sports and firearms industries, today
announced having entered into and consummated transactions that are
the subject of an Agreement and Plan of Merger dated as of March
13, 2024 (“Merger Agreement”), including the merger (the “Merger”)
of Credova with and into a wholly-owned subsidiary of the Company
established to facilitate the transaction. In connection with the
acquisition, PublicSquare exchanged approximately 2.9 million
shares of newly-issued Company Class A common stock for all of the
outstanding shares of Credova. Additionally, all of Credova’s
outstanding subordinated debt was canceled and either repaid or
exchanged for newly-issued 10-year PublicSquare promissory notes,
convertible into Company Class A common stock. Following the
Merger, Credova is a wholly-owned subsidiary of the Company.
Credova management, including its Chief Executive Officer, Dusty
Wunderlich, have joined PublicSquare and will continue to run
Credova’s business as part of PublicSquare. Mr. Wunderlich is also
expected to join PublicSquare’s board of directors.
TRANSACTION HIGHLIGHTS
Highlighted below are certain management expectations regarding
the combination of Credova’s business with PublicSquare:
- Credova has financed over a quarter billion dollars in
transactions since its inception in 2018, and its merchant and
customer universe is additive to PublicSquare, with over 4,800
merchants onboarded to date and 2.8 million unique applicants to
date
- Creates a fully uncancellable commerce stack by combining a
payments platform, financing solutions, and a marketplace
- Credova management forecasts and historical results suggest the
acquisition is expected to be immediately accretive to the Company,
before any anticipated synergies, as Credova (unaudited) management
financials reflect estimated net revenues of $15.5 million,
adjusted EBITDA (a non-GAAP measure) of approximately $2.3 million
and Free Cash Flow (a non-GAAP measure) of $1.6 million during
FY2023 (see definitions/reconciliations of non-GAAP measures
below)
- Provides PublicSquare an entry point into the buy now, pay
later (BNPL) payments universe, a critical component to the future
of marketplace transactions
- Credova’s BNPL business has compelling and differentiated
market power in values-aligned sectors including firearms,
ammunition, and outdoor recreation
- Credova is the leading BNPL solution for the firearms and
shooting sports industry
- Credova has exclusive partnerships with over 60% of the top
online shooting sports retailers
- Integrating BNPL functionality into the PublicSquare platform
is expected to act as a force multiplier to increase potential
sales for both Credova and PublicSquare merchants
- Credova leadership who have joined the Company are aligned and
committed to PublicSquare’s mission
- Transaction supports PublicSquare’s marketplace ecosystem
approach, providing potential new opportunities in payment
infrastructure as well as consumer and business financing
Michael Seifert, Chairman and Chief Executive Officer of
PublicSquare, commented, “The acquisition of Credova is a logical
next step in the growth of the PublicSquare ecosystem. The
transaction brings together two values-aligned companies and their
like-minded management, merchants, and consumers into a single
combined marketplace and payments platform. We also believe that we
completed the transaction at an attractive valuation that unlocks
significant stockholder value. This combination solidifies the
economic engine of the parallel economy and by integrating the
capabilities of Credova’s Buy Now Pay Later payments universe, we
open the door for both our consumers and merchants to explore sales
and financing opportunities that may previously have been
unavailable. This is an important milestone on our journey to
owning the infrastructure foundational to the parallel economy. We
are excited for our partnership with the excellence-driven Credova
team and the work we will do together to ensure the Constitutional
rights of every American are protected and strengthened in the
Public Square.”
Dusty Wunderlich, Chief Executive Officer of Credova, commented,
"The merger between Credova and PublicSquare is a declaration to
the world that the parallel economy is not just thriving—it's here
to endure. By uniting our strengths, we're accelerating Credova's
growth across various sectors and establishing Credova as the
preferred payment solution for shooting sports enthusiasts. The
Credova team and I are honored to advance this movement alongside
individuals who are committed to defending not only the Second
Amendment but also the fundamental, inalienable rights of our
merchants and customers. This partnership underscores the lasting
power and potential of the parallel economy, highlighting our
collective dedication to building financial infrastructure that
upholds our values and protects our community. Together, we're not
merely building a business; we're fortifying a movement poised to
make a lasting impact.”
TRANSACTION DETAILS
Pursuant to the Merger Agreement dated March 13, 2024,
PublicSquare acquired 100% of the outstanding equity of Credova, in
consideration for the issuance to former Credova stockholders of an
aggregate of approximately 2.9 million shares of Company Class A
common stock. In connection with the transaction, key members of
Credova’s management team entered into employment agreements with
the Company or its subsidiaries, as well as non-competition and
non-solicitation agreements. All former Credova stockholders also
agreed not to trade, short or hedge Company securities issued to
them in the transaction for a period of one year post-closing,
subject to certain limited exceptions (the “lock-up terms”). The
Company also granted Credova stockholders certain registration
rights with regard to the Class A shares issued in the merger. As a
condition to the Merger, all outstanding Credova subordinated debt
was either exchanged for newly-issued issued PublicSquare notes or
retired for cash consideration, including a portion funded by
newly-issued PublicSquare notes (collectively, the “Replacement
Notes”). An aggregate of $8.45 million Replacement Notes,
convertible into shares of PublicSquare common stock, were
delivered to participating former holders of Credova subordinated
notes, including new investors in Credova subordinated notes issued
prior to closing. The Replacement Notes are convertible at
noteholders’ discretion, or, under certain circumstances, the
Company’s discretion, into shares of Company Class A common stock
at a base conversion price of $4.63641 per share; they are also
callable in cash by the Company in its discretion. The Replacement
Notes will mature 2034, unless earlier converted, and bear interest
at a base rate of 9.75% per annum; the Company can require
conversion of outstanding Replacement Notes in the event that
trading prices of Class A shares exceed specified post-closing
thresholds. Holders of the Replacement Notes also agreed to the
lock-up terms and the trading and hedging restrictions described
above and have registration rights with regard to the Class A
shares issuable upon conversion of the notes.
The transaction was approved by the boards of directors of
PublicSquare and Credova and by requisite stockholders of
Credova.
In connection with the Merger, Credova’s CEO, Mr. Wunderlich,
has joined the PublicSquare executive team as President of the
Credova subsidiary and is expected to join the Company’s board.
Additionally, Jim Giudice, former Chief Legal Officer of Credova,
will replace Stephen Moran as PublicSquare’s General Counsel. The
remainder of the Company’s management team is expected to remain
unchanged and PublicSquare will continue to be headquartered in
West Palm Beach, Florida.
ADVISORS
In connection with the transactions, Farvahar Capital acted as
M&A advisor to PublicSquare. Ellenoff Grossman & Schole LLP
acted as acquisition counsel to PublicSquare and Nelson Mullins
Riley & Scarborough LLP acted as regulatory and securities
advisors to PublicSquare. Faegre Drinker Biddle & Reath LLP
acted as legal advisor to Credova.
INVESTOR PRESENTATION
PublicSquare published a presentation to provide an overview of
the transaction, available on PublicSquare’s Investor Relations
website, https://investors.publicsquare.com.
WEBCAST
Management will host prepared remarks today at 9:00 am ET. The
live webcast and replay can be accessed at
https://investors.publicsquare.com.
About PublicSquare
PublicSquare is an app and website that connects patriotic
Americans to high-quality businesses that share their values, both
online and in their local communities. The primary mission of the
platform is to help consumers “shop their values” and put purpose
behind their purchases. In just over one and a half years since its
nationwide launch, PublicSquare has seen tremendous growth and
proven to the nation that the parallel, “patriotic” economy can be
a major force in commerce. The platform has over 75,000 businesses
from a variety of different industries and over 1.6 million
consumer members. Additionally, PublicSquare leverages data and
insights from the platform to assess its members’ needs and provide
wholly-owned quality financing products, such as Credova, D2C
products, such as EveryLife diapers and wipes, and B2B products,
such as PSQLink, to fill those needs. PublicSquare is free to join
for both consumers and business owners alike, and to learn more,
download the app on the App Store or Google Play, or visit
PublicSquare.com.
About Credova
Credova offers industry-leading buy now, pay later solutions,
empowering consumers with flexible payment options and driving
substantial growth for merchants. As a pioneer in the BNPL sector,
Credova enables flexible purchasing of items such as firearms,
ammunition, and shooting sports accessories, both online and in
brick-and-mortar locations. Deeply committed to preserving American
freedoms, Credova effortlessly bridges the gap between aspiration
and ownership, making essential and leisure items more accessible.
Dedicated to nurturing the adventurous American spirit, Credova
enriches lives with transparent, adaptable payment solutions,
epitomizing a commitment to financial empowerment and traditional
values.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended, and for purposes
of the “safe harbor” provisions under the United States Private
Securities Litigation Reform Act of 1995. Any statements other than
statements of historical fact contained herein are forward-looking
statements. Such forward-looking statements include, but are not
limited to, expectations, hopes, beliefs, intentions, plans,
prospects, financial results or strategies regarding PublicSquare
and Credova, anticipated product launches, our products and
markets, future financial condition, expected future performance
and market opportunities of PublicSquare and Credova.
Forward-looking statements generally are identified by the words
“anticipate,” “believe,” “could,” “expect,” “estimate,” “future,”
“intend,” “may,” “might,” “strategy,” “opportunity,” “plan,”
“project,” “possible,” “potential,” “project,” “predict,” “scales,”
“representative of,” “valuation,” “should,” “will,” “would,” “will
be,” “will continue,” “will likely result,” and similar
expressions, and in this press release, include statements about
the anticipated benefits of the acquisition of Credova; however,
the absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements are predictions,
projections and other statements about future events that are based
on current expectations and assumptions and, as a result, are
subject to risks and uncertainties. Many factors could cause actual
future events to differ materially from the forward-looking
statements in this communication, including, without limitation:
(i) the outcome of any legal proceedings that may be instituted
against PublicSquare related to the acquisition of Credova, (ii)
unforeseen liabilities, future capital expenditures, revenues,
expenses, earnings, synergies, economic performance, indebtedness,
financial condition, losses, future prospects, business and
management strategies for the management, expansion and growth of
the combined company’s operations, including the possibility that
any of the anticipated benefits of the transaction will not be
realized or will not be realized within the expected time period,
(iii) the ability of PublicSquare and Credova to integrate the
business successfully and to achieve anticipated synergies and
value creation, (iv) changes in the competitive industries and
markets in which PublicSquare operates, variations in performance
across competitors, changes in laws and regulations affecting
PublicSquare’s business and changes in the combined capital
structure, (v) the ability to implement business plans, growth,
marketplace and other expectations, and identify and realize
additional opportunities, (vi) risks related to PublicSquare’s
limited operating history, the rollout and/or expansion of its
business and the timing of expected business milestones, including
Every Life, PSQ Link, E-commerce, the Tucker Carlson partnership
and Credova, (vii) risks related to PublicSquare’s potential
inability to achieve or maintain profitability and generate
significant revenue, (viii) the ability to raise capital on
reasonable terms as necessary to develop its products in the
timeframe contemplated by PublicSquare’s business plan, (ix) the
ability to execute PublicSquare’s anticipated business plans and
strategy, (x) the ability of PublicSquare to enforce its current or
future intellectual property, including patents and trademarks,
along with potential claims of infringement by PublicSquare of the
intellectual property rights of others, (xi) actual or potential
loss of key influencers, media outlets and promoters of
PublicSquare’s business or a loss of reputation of PublicSquare or
reduced interest in the mission and values of PublicSquare and the
segment of the consumer marketplace it intends to serve, and (xii)
the risk of economic downturn, increased competition, a changing
regulatory landscape and related impacts that could occur in the
highly competitive consumer marketplace, both online and through
“bricks and mortar” operations. The foregoing list of factors is
not exhaustive. Recipients should carefully consider such factors
and the other risks and uncertainties described and to be described
in PublicSquare’s public filings with the Securities and Exchange
Commission. These filings identify and address other important
risks and uncertainties that could cause actual events and results
to differ materially from those contained in the forward-looking
statements. Forward-looking statements speak only as of the date
they are made. Recipients are cautioned not to put undue reliance
on forward-looking statements, and PublicSquare does not assume any
obligation to, nor does it intend to, update or revise these
forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required by law.
PublicSquare gives no assurance that PublicSquare will achieve its
expectations.
Credova Non-GAAP Reconciliation
(2022 Audited vs. 2023 Unaudited)
2023
2022
Originations
$60.8
$57.4
Revenue
$15.5
$17.1
Cash & Cash Equivalents
$1.3
$0.8
Revolving Loan Facility
$5.9
$14.7
2023
2022
Net Income / (Loss)
($0.1)
($6.8)
(+) Amortization of Capitalized
Software
0.9
2.0
(+) Depreciation of Lease Merchandise
--
0.5
(+) Depreciation of Vehicles &
Equipment
0.1
0.1
(+) Amortization of Deferred Financing
Costs
0.1
0.3
(+) Amortization of Debt Discount
--
0.7
(+) Interest Expense
3.0
4.5
(-) Revolving Loan Facility Interest
Expense
(1.8)
(3.3)
(-) Revolving Loan Facility Debt Issuance
Costs
--
(0.1)
(+) Tax Expense / (Benefit)
--
(0.5)
Adjusted EBITDA
$2.3
($2.7)
(-) Tax Expense / (Benefit)
--
$0.5
(+) Provision for Loan & Lease
Losses
2.0
4.1
(+) Deferred Income Tax
--
(0.5)
Change in Operating Assets &
Liabilities
Prepaid Expenses and Other Assets
0.3
0.3
Accounts Payable
(0.3)
0.8
Accrued Liabilities
0.1
(0.1)
Income Tax Payable
--
(0.2)
Origination of loans and leases for
resale
(47.2)
(33.4)
Proceeds from sale of loans and leases for
resale
53.2
38.2
Gain on sale of loans and leases from
resale
(6.0)
(4.8)
Disbursements of Loans Receivable
(13.1)
(34.2)
Principal Paydown of Loans Receivable
19.5
32.0
Net Change in Lease Merchandise
--
1.8
Purchase of Vehicles & Equipment
--
(0.4)
Purchase of Capitalization Software
(0.4)
(0.9)
Net Payment in Revolving Loan Facility
(8.7)
(2.4)
Free Cash Flow
1.6
(1.9)
(-) Interest Expense (Net for Revolving
Loan Facility Interest)
(1.3)
(1.2)
Free Cash Flow to Equityholders
$0.3
($3.1)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240314650653/en/
Investors Contact: William I. Kent, IRC +1
561.203.0780 investment@publicsquare.com
Media Contact: pr@publicsquare.com
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