The value of the investment by Meitav Investment House in Tel Aviv-based fintech company Liquidity Group has shot up again, with a capital raising round at a valuation of $1.4 billion. After completion of the round, the investment house controlled by the Stepak family and Eli Barkat will hold 33% of the shares in Liquidity, fully diluted.
This holding alone is worth, on paper, more than double Meitav’s current market cap. In terms of the current funding round, Meitav’s stake in Liquidity will be worth $466 million, while its market cap on the Tel Aviv Stock Exchange is NIS 736 million (about $207 million). In response to the report of the round, Meitav’s market cap rose 8% yesterday, but over the past year the firm has lost about a third of its market cap.
Liquidity manages a number of loan funds in the Cayman Islands and Singapore that provide credit for growth companies. The company has developed a machine-learning based automated system that provides lending solutions for due diligence, credit rating, deal structure, and so forth.
In the current round, MUFG Bank of the Mitsubishi group, an existing investor in Liquidity, signed a non-binding MOU for a further $40 million investment in the company against an allocation of shares that will represent a 2.9% stake. If the deal is completed, it will generate a capital gain for Meitav of NIS 50-55 million.
As mentioned, Liquidity’s valuation for the purposes of the investment is $1.4 billion. This comes less than a year after the company raised capital at a valuation of up to $800 million. That in turn was a huge leap from the valuation of $100 million at which Liquidity raised capital at the end of 2020.
The valuation represents a fantastic gain for Meitav, which bought control of Liquidity in an investment agreement under which it invested $540,000 in return for 54% of the company.
In addition, after obtaining approval from the audit committee and the board of directors, Meitav CEO Ilan Raviv invested some $60,000 in Liquidity against an allocation of 4% of the shares. These sums now represent a tiny fraction of Liquidity’s valuation,
Liquidity, which now manages $2.5 billion in assets, is an exceptional success story, according to sources close to the company, even for a fintech company. According to these sources, Liquidity’s business is growing at an annual rate of 500%, almost without any cash burn. Ron Daniel, the company’s founder, serves as its CEO, and Avner Stepak, one of the owners of Meitav, is chairperson.
The valuation of Liquidity was commissioned from US investment bank Morgan Stanley. The MOU with MUFG stipulates that if Liquidity does not start an IPO process by the date set, and in accordance with the conditions in the MOU, MUFG will have the right to sell to Liquidity the shares allocated, on certain conditions.
In April 2022, Apollo Global Management, one of the largest investment funds in the world, invested in Liquidity, together with MUFG Bank and Spark Capital, which together held 20% of the company before that investment deal. The amount invested then was $40 million in a SAFE (Simple Agreement for Future Equity) transaction which allows for future conversion of the investment into shares. Other investors invested $5-10 million in that round.
The MOU for the current round of investment by MUFG in Liquidity provides that before the capital is injected, all the rights under the series of SAFE agreements to which Liquidity is a party will be converted into shares in the company at a share price reflecting a valuation of $800 million immediately after the conversion is executed.
For investors in Meitav, this is positive news after the blow to the investment house in the summer of 2021 when the court ruled in a class action against it that it had to repay more than NIS 400 million to savers in one of the provident funds under its management, because of excess collection of management fees. Meitav posted a loss of some NIS 500 million for the third quarter of 2021, and wrote of about half of its shareholders’ equity at that time.
Meitav continues to fight the ruling, and on January 9 the Supreme Court heard appeal by the parties, and recommended them to go to arbitration.
Liquidity was represented by Advד. Yoav Etzyon, Efrat Shpizaizen and Karin Lichterman from the Amit Pollak Matalon law firm.
Published by Globes, Israel business news - en.globes.co.il - on February 20, 2023.
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