While small business lender OnDeck Capital has had a tough year, there might be hope on the horizon.
OnDeck reported its second-quarter results last month, revealing that loan originations plunged to $66 million, down around 89 percent from both the prior and year-ago quarter. The company blamed the decline on its decision to “temporarily suspend originating new term loans and lines of credit” due to the COVID-19 pandemic.
The news followed disappointing Q1 results, which showed a $59 million first-quarter net loss and $57.6 million adjusted net loss due to an increased allowance set aside to cover credit losses from the pandemic. The company then withdrew its 2020 guidance, but said it foresees a “modest net loss” for the third quarter.
After its Q1 losses, OnDeck’s stock fell 24.8 percent to $1.21 on the New York Stock Exchange, with shares losing around 96 percent of their value since December 2014. That led to activist investor Voce Capital Management, LLC—one of OnDeck’s largest stockholders—writing a letter to stockholders to urge them to vote against three OnDeck board members who were running for re-election, citing “OnDeck’s lack of strategic focus, runaway costs and weak corporate governance have contributed to chronic underperformance.”
Now there seems to be some positive news for the struggling company: Enova International plans to acquire OnDeck for around $90 million in cash and stock ($8 million will be paid in cash). OnDeck and Enova had a combined $4.7 billion in originations last year and have served roughly 7 million clients.
"This strategic transaction, which brings together two FinTech leaders, is a great opportunity for customers, employees and shareholders of both companies," said David Fisher, CEO of Enova. "Together, our companies will be stronger because of the complementary strengths and synergies of our businesses.”
As part of the deal, OnDeck stockholders will get 0.092 shares of Enova common stock and 12 cents in cash for each of their shares, which is about $1.38 per share, or a 62.4 percent premium over what the company closed at before the announcement. Upon completion of the transaction, shareholders will own approximately 16.7 percent of the combined entity, with Enova shareholders owning approximately 83.3 percent.