Paltalk, Inc. (NASDAQ: PALT), a company specializing in communications software and multimedia social applications, has announced a definitive agreement to acquire Newtek Technology Solutions, Inc. (NTS), a subsidiary of NewtekOne, Inc.
The acquisition, expected to close between the fourth quarter of 2024 and the first quarter of 2025, is subject to shareholder and regulatory approvals, as well as the completion of a divestiture transaction.
Paltalk will pay Newtek $4 million in cash and issue 4 million shares of a newly created series of preferred stock, which will convert into Paltalk common stock upon certain conditions. The equity interest Newtek will hold in Paltalk is expected to be roughly 30.3% on a fully diluted basis.
Jason Katz, Paltalk’s CEO, believes the acquisition will significantly impact the company's revenue and provide future growth opportunities. NTS's revenue in 2023 was approximately triple that of Paltalk's. Paltalk's entry into cloud infrastructure and cybersecurity is seen as a strategic move, with the potential for organic growth and further acquisitions.
Barry Sloane, Newtek’s CEO, expressed confidence in Paltalk's management to grow NTS, which specializes in managed technology solutions including server hosting, cloud hosting, and IT security.
The acquisition is part of Paltalk's strategy following Newtek’s transformation into a financial holding company and its commitment to the Federal Reserve to divest NTS. Paltalk's expertise in cybersecurity and cloud infrastructure is expected to complement NTS's offerings, including the ManyCam product.
In addition to the initial consideration, Newtek may receive up to $5 million based on future EBITDA performance, payable in cash, preferred stock, or a combination thereof, subject to a total equity cap.
Post-acquisition, around 50 NTS employees are expected to join Paltalk. The company also plans to change its name to Intelligent Protection Management Corp. and change its ticker symbol from PALT to IPM.
The transaction is supported by certain Paltalk stockholders, directors, and executives who have agreed to vote in favor of the stock issuance and divestiture transaction at Paltalk's 2024 Annual Meeting of Stockholders.
InvestingPro Insights
As Paltalk, Inc. (NASDAQ: PALT) embarks on the strategic acquisition of Newtek Technology Solutions, investors are closely monitoring the company's financial health and market performance. Here are some key insights from InvestingPro that could shed light on Paltalk's current position and future prospects:
InvestingPro Data:
- Paltalk holds a market capitalization of $37.07 million, suggesting a moderate size within the communications software and multimedia social applications market.
- The company's Price to Earnings (P/E) ratio stands at -46.57, reflecting investor sentiment on its earnings potential and market valuation.
- A notable Gross Profit Margin of 70.45% for the last twelve months as of Q1 2024 indicates a strong ability to retain revenue after the cost of goods sold, which may be a positive sign for operational efficiency post-acquisition.
InvestingPro Tips:
- Paltalk's balance sheet shows more cash than debt, which could provide financial flexibility as it integrates Newtek Technology Solutions into its operations.
- Analysts predict the company will become profitable this year, aligning with CEO Jason Katz's expectations for the acquisition to significantly impact revenue and growth opportunities.
Investors interested in a deeper analysis can find additional InvestingPro Tips on the company's outlook, including metrics on return performance and profitability forecasts, at https://www.investing.com/pro/PALT. There are 5 more InvestingPro Tips available that provide further insights into Paltalk's financial landscape and investment potential.
With these data points and expert analyses, stakeholders can better understand the financial implications of Paltalk's acquisition strategy and its potential to reshape the company's future in a competitive industry.
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