Paradise Kietirikulu
NewTechOne (NASDAQ:NEWT) has agreed to sell NewTech Technology Solutions to Paltalk (NASDAQ:PALT) in line with its commitment to the Federal Reserve to divest or terminate NTS activities in connection with its acquisition of NewTech Bank and transition to a financial holding company, the company announced Monday.
Paltalk (PALT) will pay $4 million in cash to NewtekOne (NEWT) and issue 4 million shares of a newly created series of non-voting preferred stock.
Shares of New Tech One (NEWT) were down 2.1% in midday trading, while Paltalk (PALT) was down 0.8%.
Upon certain transfers of the preferred shares, each share will automatically convert into one Paltalk (PALT) common share, subject to certain anti-dilution adjustments. Upon closing, which is expected in the fourth quarter of 2024 or the first quarter of 2025, NEWT's equity interest in Paltalk will represent approximately 30.3% of Paltalk's total shares on a converted and fully diluted basis.
NewtekOne (NEWT) may also receive up to $5 million, payable in cash, preferred stock, or a combination of both, based on the achievement of certain cumulative average adjusted EBITDA thresholds in fiscal years 2025 and 2026.
“Retaining our non-voting ownership of Paltalk will enable us to participate in the potential economic benefits of what we see as a pure play company primarily managing business IT security and managed technology solutions in one of the most important markets in the U.S. economy today,” said Barry Sloane, chairman, president and CEO of NewTekOne (NEWT).
Jason Katz, Chairman and CEO of Paltalk (PALT), said, “NTS's 2023 revenue was approximately three times Paltalk's 2023 revenue, so we expect the acquisition to have an immediate and material impact on our earnings once completed. We also expect the acquisition to provide expanded opportunities for future growth and optimization.”
