Dave's Repurchase of FTX Convertible Note for $71 Million Finalized

Rhea-AI Summary

Dave Inc. repurchased a convertible note from FTX Ventures Ltd. at a $35 million discount, relative to a $105.5 million total liability. The purchase price of $71 million represents 67 percent of the outstanding balance as of December 31, 2023. The transaction closed on January 29, 2024, enhancing Dave's ability to deliver on strategic objectives. Dave had $181 million of total liquidity as of September 30, 2023, including cash, cash equivalents, marketable securities, short-term investments, restricted cash, and undrawn capacity on its credit facility.

Positive

• Dave repurchased the Note at a significant discount, creating value for shareholders.
• The company's total liquidity as of September 30, 2023, was $181 million, providing a strong capital position for future growth and profitability.

Negative

• None.

Financial Analyst

The repurchase of a convertible note at a significant discount by Dave Inc. reflects a strategic financial maneuver that can have multiple implications for the company's financial health and stock performance. By repurchasing the note for $71 million, which is 67% of the outstanding balance, Dave Inc. has effectively reduced its debt liability by $34.5 million. This transaction suggests that the company is leveraging its strong balance sheet to negotiate favorable terms, potentially signaling confidence in its future cash flows and financial stability to investors.

This reduction in debt could lead to an improvement in key financial ratios such as the debt-to-equity ratio and interest coverage ratio, which are critical indicators of financial health watched closely by investors and analysts. The improved financial standing may also provide Dave Inc. with greater flexibility to allocate capital towards growth initiatives or return value to shareholders, possibly through dividends or share buybacks in the future. However, the market's perception of this transaction will also depend on the opportunity cost of using the company's liquidity in this manner, as opposed to other investment opportunities.

Market Research Analyst

From a market perspective, the repurchase transaction by Dave Inc. could be interpreted as a strategic move to optimize capital structure and enhance shareholder value. The discount achieved in the repurchase suggests that Dave Inc. is proactive in capitalizing on opportunities to reduce its cost of capital. This action could be viewed positively by the market, as it demonstrates management's commitment to prudent financial management and value creation.

It is also important to consider the broader implications within the neobanking sector. Neobanks are typically characterized by their rapid growth and innovative business models, which often require significant capital. Dave Inc.'s ability to carry out such a transaction may set it apart from competitors, potentially leading to a re-rating of the stock by investors who value strong balance sheets and proactive debt management. The transaction may also influence the competitive landscape, prompting other neobanks to reassess their financial strategies in light of Dave Inc.'s actions.

Economist

Examining the macroeconomic context, the decision by Dave Inc. to repurchase its convertible note could be influenced by the current interest rate environment and expectations for future rates. If interest rates are anticipated to rise, repurchasing debt at a discount could be a hedge against higher future borrowing costs. This move might also reflect an assessment of the economic outlook, with the company possibly expecting stable or improving conditions that would support its growth and profitability objectives.

However, the broader economic impact of such transactions is generally limited to the company's stakeholders, unless the transaction is part of a larger trend among similar firms, which could signify a shift in the sector's approach to leverage and liquidity management. The ability of a company to execute a transaction of this nature can also be indicative of its access to capital markets and overall market confidence in its business model and management team.

Note Repurchase at a $35 Million Discount Relative to $105.5 Million Total Liability

Transaction Capitalizes on Strength of Balance Sheet and Enhances Ability to Deliver on Strategic Objectives

LOS ANGELES, Jan. 30, 2024 /PRNewswire/ -- Dave Inc. ("Dave" or the "Company") (Nasdaq: DAVE), one of the nation's leading neobanks, today announced the closing of its transaction with FTX Ventures Ltd. ("FTX") to repurchase a convertible note (the "Note") that it issued to FTX with an original principal balance of $100 million, for a discounted purchase price of $71 million. This purchase price represents 67 percent of the $105.5 million outstanding balance as of December 31, 2023. The transaction closed on January 29, 2024. 

Prior to this transaction closing, Dave had $181 million of total liquidity as of September 30, 2023, which included $171 million of cash, cash equivalents, marketable securities, short-term investments and restricted cash as well as $10 million of undrawn capacity on its credit facility.

"The closing of this transaction is an exciting step forward for Dave and represents a unique opportunity to create value for our shareholders. We believe we are well capitalized and remain in a strong position to deliver on our growth and profitability objectives in the quarters ahead," said Dave CEO and founder, Jason Wilk.

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 was the original principal balance of the convertible note?

The original principal balance of the convertible note was $100 million.

What was the discounted purchase price of the convertible note?

The discounted purchase price of the convertible note was $71 million, representing 67 percent of the outstanding balance.

When did the transaction close?

The transaction closed on January 29, 2024.

How much total liquidity did Dave have as of September 30, 2023?

Dave had $181 million of total liquidity, including cash, cash equivalents, marketable securities, short-term investments, restricted cash, and undrawn capacity on its credit facility.