Katapult is going public in a SPAC merger with FinServ Acquisition Corp (NASDAQ: FSRV) and Katapult CEO Orlando Zayas joined the SPACs Attack show Thursday.
The SPAC Deal: Katapult has been evaluating a potential IPO or SPAC deal since last summer after being approached with an unsolicited offer from a competitor, Zayas told Benzinga. The timing was right in going public via a SPAC now.
“It’s going to give us exposure to the retailers,” Zayas said.
One of the reasons FinServ Acquisition may have liked a deal with Katapult was the profitability of the company.
“We’ve been profitable since the beginning of 2020,” Zayas said.
Non-Prime Lending: Katapult is the largest non-prime e-commerce flexible leasing company. The company gives consumers options like being able to buy out the lease early.
Katapult gives the same choices to non-prime customers that prime customers have as Zayas notes these customers have been overlooked in the past. The non-prime market is estimated at $40 billion to $50 billion for e-commerce. Katapult has less than 1% market share now, but Zayas believes Katapult can grow.
“I want to get 5% to 10% market share,” Zayas said, noting it’s a very reachable goal.
Partnerships: Katapult has partnerships with over 150 merchants. Partners include Wayfair Inc (NYSE: W), Shopify Inc (NYSE: SHOP) and Affirm Holdings (NASDAQ: AFRM).
The partnership with Affirm gives Katapult access to customers who were rejected for leasing options. Affirm then sends the data to Katapult who can offer approval to the customer.
Katapult is not offered on Peloton Interactive’s (NASDAQ: PTON) platform, but Zayas hopes it will be eventually. Affirm gets a large portion of its revenue from Peloton customers.
Katapult is considering over 900 merchants that it could potentially work within a similar manner of gaining customers Affirm has rejected.
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Ecommerce Growth/Stimulus: The COVID-19 pandemic has led to an increase in e-commerce spending, something that has benefitted Katapult.
Consumers getting stimulus from the federal government was also a positive for Katapult.
The company’s two busiest days of the year are typically Black Friday and Cyber Monday. In 2020, the company’s second-biggest day was April 15, the day the stimulus hit.
Consumers made new purchases and also started paying ahead of time due to the stimulus.
The stimulus helped Katapult from both a volume and payment perspective, Zayas said. Delinquencies are the lowest in company history.
What’s Next: Katapult is considering mergers and acquisitions to grow the business and also a potential dividend.
“We’re generating a lot of cash right now, something that makes us unique in the SPAC world,” Zayas said.
The company is on track to close the SPAC merger in the second quarter, but Zayas said the SEC is backed up with lots of deals going on.
“We want to get this done as quick as possible.”
Click here to see the full interview with Orlando Zayas.
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