Plastiq files for bankruptcy, inks deal with Priority

Plastiq, a B2B payments business last valued at $480 million in a now-canceled SPAC deal, filed for bankruptcy in a Delaware court Wednesday.

Why it matters: Investors currently favor B2B fintechs over consumer-facing ones. That doesn't mean all will survive as standalone businesses.

Context: Priority Technology Holdings plans to acquire Plastiq out of bankruptcy pending court approval, the two announced the same day.

• Priority and Plastiq did not disclose full terms of the deal, though it will include a $27.5 million cash payment. In the bankruptcy court filing, chief restructuring officer Vladimir Kasparov estimated assets and liabilities totaling $50 million to $100 million each.

Background: Billed as an SMB credit card and payments company, Plastiq has raised about $140 million in funding over its lifetime from investors including Kleiner Perkins, B Capital Group, and Top Tier Capital.

• In August, it announced plans to go public via merger with Colonnade Acquisition Corp. II in a deal that valued it at about $480 million including debt. The combination would've added about $320 million to Plastiq's balance sheet.
• At the time, Plastiq reported $47 million in net revenue in 2021 and a negative adjusted EBITDA of $54 million.
• That deal fell apart in March, with Colonnade citing "actions of the counterpart" in a press release as the reason behind the dissolution.

Details: According to bankruptcy documents, Plastiq was facing liquidity issues shortly before the SPAC deal was canceled, and it had failed to maintain a minimum cash balance.

• It had also bought Nearside, a financial software company for SMBs, for about $57.2 million in stock and some cash in September.
• Some three months later, Plastiq shut that business down. "The Debtors discovered that Nearside lacked the technology, security, and controls to sell into Plastiq’s customer base," the filing read.

Of note: Plastiq had many of its operating bank accounts with Silicon Valley Bank, which failed in March. It also relied on SVB's money transmitter license to operate in several states.

• Plastiq moved that business to Priority in mid-March SVB shutdown, eliminating its reliance on the bank, per the filing.