- IOU urges shareholders to REJECT Qwave Partial Offer
- Qwave lacks credible plan and its offer is substantially inadequate
- IOU’s business continues to accelerate and has originated US$260 million in loans since inception
MONTREAL, Sept. 8, 2015 /CNW/ – IOU Financial Inc. (TSX Venture Exchange: IOU) (“IOU” or the “Company“), a leading online lender to small businesses, today released a letter from the Chairman of the Board of Directors (the “Board“) to IOU shareholders (“Shareholders“), further responding to the unsolicited partial takeover offer from Qwave Capital LLC (“Qwave“) for the purchase of 34,000,000 outstanding common shares (the “Common Shares“) of IOU (representing approximately 55.3% of the issued and outstanding Common Shares at the date hereof (50.4% of Common Shares on a fully-diluted basis) at a price of $0.50 per Common Share (the “Qwave Partial Offer“).
Shareholders are encouraged to review IOU’s Directors’ Circular which sets forth in greater detail the Board’s recommendation and the reasons for rejecting the Qwave Partial Offer, is available under the Company’s profile on SEDAR at www.sedar.com and was mailed to all Shareholders. The Directors’ Circular is also available on the Company’s Website www.ioufinancial.com.
The full text of the Chairman’s letter follows:
Dear Fellow Shareholders:
You have an important decision to make, one that will affect the future of your investment in IOU.
As you know, an entity called “Qwave” made a partial bid for IOU several weeks ago. If successful, Qwave would gain control of just over 50% of IOU fully diluted outstanding shares, allowing it to effectively control IOU without having to purchase the entire company and without having to pay all Shareholders an appropriate control premium. Due to the effect of pro-ration if all Shareholders were to accept the Qwave Partial Offer, Shareholders will be able to tender at most 55.3% of their outstanding shares to the Qwave Partial Offer.
After the successful completion of the Qwave Partial Offer, the remaining minority shareholders of IOU will have little say in how their company is run, since Qwave’s holdings will allow it to install a board of its choosing. Important decisions about future M&A activity, operations, and leadership, will be in the hands of Qwave’s hand-picked directors. In addition, with 50% fewer Common Shares outstanding, the stock may suffer from significantly lower trading liquidity, resulting in less attention from the marketplace. Most importantly, the Board believes that in the hands of Qwave, IOU will have significantly diminished prospects for growth and profitability given the risk of the potential loss of key management personnel and Qwave’s lack of operating experience.
On July 10 th , the Board unanimously recommended that IOU shareholders REJECT the Qwave Partial Offer and NOT TENDER their Common Shares. Each member of the Board and management team has also rejected the Qwave Partial Offer and will not tender their personal shareholdings.
The timing of the Qwave Partial Offer is highly opportunistic, as it comes at a critical inflection point in IOU’s business and amid increased investor interest in the alternative non-bank lending space. The years of work invested by our management team, and you, our shareholders, to develop IOU’s lending platform, sales channels and partnerships is beginning to bear fruit, and we are seeing a significant acceleration in our business which was apparent in the second quarter of 2015, and has continued in the third quarter. In the second quarter of 2015, IOU originated US$33.8 Million in new loans, representing a year over year increase of 40%. In the current third quarter, for the months of July and August alone, loan originations totaled US$31.3 Million, representing a year over year increase of 150% vs. the same period in 2014.
To-date we have originated over US$260 million of loans since inception.
In addition, IOU announced plans to build on its success in the United States by expanding its offering to Canada – transforming small business lending in its home market.
We believe that further market expansion, backed up by consecutive quarters of strong and consistent loan growth will ultimately be recognized and rewarded by the stock market. We should not be surprised that firms like Qwave would want to get in front of the stock market’s recognition of value with an inadequate and potentially coercive takeover bid. It is up to us as shareholders, to recognize the tremendous opportunity in front of us and reject a bid that your board believes deeply undervalues IOU’s market position, assets, brand presence, and long-term business prospects.
To-date, Qwave has failed to articulate a credible plan for IOU and has said little about its track record and principals other than noting their activities have been focused on “physics and the material sciences”. In contrast, IOU has a well-thought out strategic plan, a track-record of growth and execution and a motivated and highly-qualified management team led by CEO Philippe Marleau. The Board believes that the loss of IOU’s management team could adversely affect the value of the remaining shares of IOU following the completion of the Qwave Partial Offer. The Board also reminds Shareholders that it is pursuing alternative transactions to the Qwave Partial Offer, and it anticipates making an announcement on the conclusion of its deliberations in the short term.
Fellow Shareholders, I urge you to reject the Qwave Partial Offer and allow your Board and management team to remain focused on delivering sustainable profitability and long term shareholder value. IOU has the right plan, the right people and is delivering results for Shareholders.
To REJECT the Qwave Partial Offer, you don’t need to take any action. Simply discard any materials sent to you byQwave or their representatives. If you have tendered your Common Shares to the Qwave Partial Offer, withdraw them as indicated in the Directors’ Circular.
If you have questions or require assistance, please contact IOU Financial at 1-877-419-0934 (toll-free in North America) or firstname.lastname@example.org
Evan Price, Chairman of the Board