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What Led The Newtek Business (NEWT) Stock To Fall 13% Premartket?

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In premarket trading today, Newtek Business Services Corp. (NEWT) shares were trading at $30.00, down -13.27%. The NEWT stock closed the last session at $34.59, declining -0.86% or -$0.3. Over the course of the day, NEWT stock fluctuated between $34.50 and $35.39. The daily volume of NEWT stock was 0.12 million shares, less than the company’s average daily volume over the last 50 days of 0.2 million and less than the company’s volume over the last year of 0.17 million. NEWT stock dropped dramatically after an acquisition deal was announced.

NEWT has been acquiring what?

Newtek specializes in providing business solutions. Under the Newtek brand, NEWT provides a wide range of business and financial solutions to the small- and medium-sized business (“SMB”) market through its managed portfolio companies. Since 1999, NEWT has provided software and services that assist a broad range of SMBs in both optimizing their sales and costs, as well as reducing their risks, by taking advantage of the most advanced technology.

It was announced yesterday that Newtek Business had entered into an agreement to acquire National Bank of New York City (“NBNYC”).

  • NEWT will acquire NBNYC (the “Acquisition”) for $20 million in cash, comprising approximately $204 million in assets and $36.5 million in tier 1 capital.
  • In order to close the Acquisition, NBNYC must have $20 million of tangible common equity.
  • As part of a plan to reposition NEWT as a bank holding company, the acquisition is subject to approval by, among others, federal banking regulators, the US Small Business Administration (SBA), and NEWT shareholders to withdraw the company’s designation as a business development company.
  • NEWT will become a bank holding company that will elect financial holding company status (FHC) following shareholder and regulatory approvals.
  • NEWT anticipates that the transaction will close within six to twelve months.
  • By acquiring and converting to a bank holding company, NEWT will be able to reduce risk, enhance shareholder value, and offer greater flexibility to serve its business clients in a way it cannot currently offer.

What will NEWT stock gain from the acquisition?

The acquisition and conversion of Newtek (NEWT) to a bank holding company will be accretive for shareholders over the long term, and it can become a bank of the future via successful commercialization of the technologies it has successfully utilized over the last two decades. The acquisition will allow NEWT to unlock hidden potential for its customers, as the lines between lending, payments, payroll, and technology are blurring and NEWT is well-positioned to capitalize on these changes.

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