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Katapult to go public via SPAC in $1 billion deal

Company is profitable and projects revenue of $250 million in revenue for 2020

The buy now, pay later space just keeps getting hotter.

Katapult Holding, a lease to own platform, announced Friday that it will go public through a merger via SPAC FinServ Acquisition Corp. in a deal valued at about $1 billion.

Katapult provides e-commerce point of sale financing for nonprime consumers. The 7-year-old company’s technology platform pairs merchants, such as Wayfair, with consumers who fall in between prime and subprime in terms of credit score.

In other words, Katapult is similar to Affirm but works with consumers with credit that is not bad but not high enough to receive 0% financing, for example. Katapult funds the credit for the nonprime consumer and takes the risk at a more appropriate rate. And the big sovereign wealth funds and other institutional investments like this kind of credit risk because of the higher yield.

Speaking of Affirm, Katapult has a partnership where it can provide a retailer with a solution for both prime consumers (Affirm) and nonprime consumers (Katapult).  (For its part, Affirm recently filed for an IPO, although it’s reportedly delayed).

Katapult CEO Orlando Zayas told FinLedger: “We can certainly be compared to Affirm, but we target the nonprime consumer, which has been overlooked. In our partnership with Affirm, we’re able to go into a retailer together, Affirm will take the prime consumers, and we’ll take the nonprime consumer.”

Once the deal closes sometime in the first half of 2021, the combined company will operate as Katapult and plans to trade on Nasdaq under the new symbol “KPLT.” 

Zayas said in a statement that since the company’s inception, its goal  “always been to provide a clear, transparent, and attractive transaction solution for nonprime consumers to access the essential products they need for everyday living.”

The company currently serves over 150 merchants and 1.4 million consumers. 

By going public via this SPAC, the company will be able to “accelerate” its growth opportunities.

FinServ CEO Lee Einbinder said the company conducted a “comprehensive search” before deciding to partner with Katapult.

The company, he said, “emerged as the most impressive partner, exceeding all of our criteria for a successful transaction.”  

The company does have impressive financials – apparently, it’s profitable with about $250 million of projected revenue for 2020, which is up over 172% year over year. It has about 90 employees between its headquarters in New York and second office in Plano, Texas.

When asked why Katapult decided to go public now, Zayas told FinLedger: “I think it was the right time in the evolution of our business. We were ready to access the public capital markets to help spur our growth, both organically and through selective M&A, and I also think being public will further enhance our reputation among the merchant community as a strong company and partner.”

As FinLedger has previously reported, SPACs (special purpose acquisition companies) are becoming an increasingly popular method to go public. In recent months, we’ve covered the launch of a number of fintech-focused SPACs, including Billtrust, Cascade and Lefteris.

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