Liberty Tax Closes SPAC Deal Amid “Pathetic” Fight With Founder | Franchise News



In a rare feat in the franchise world, Liberty Tax Service entered its SPAC deal on July 2 when it merged with a special acquisition company to be part of NextPoint Financial, along with new sister company LoanMe.

The deal was reached amid an ongoing lawsuit between Liberty Tax and its founder, John Hewitt, which NextPoint CEO Brent Turner addressed in an interview after the deal was closed. “It is a sad situation and it is pathetic,” he said. (Learn more about this below.)

The shutdown of PSPC has been “very risky in recent months,” said Turner, who believes the ability for franchisees to add consumer loans to their tax preparation services will be a godsend. “We will no longer depend solely on tax services as our main source of income. “

The PSPC market has changed dramatically over the past year, making this transaction difficult to close. “The allure of PSPC, and it could be a double-edged sword, there are a lot of opportunities for any hedge fund with liquidity to speculate without risk,” he said, as the money of the investors are placed in a trust fund that cannot go lower when the deal actually ends.

“We did it a year ago” when the PPCS market was hot and many investors put money into PSPCs in hopes they would rise 30% or more at close. . “But if you create the SPAC at $ 10 a share,” and that’s the price it sells for, “you’re probably going to have a lot of buybacks,” he said.

“Frankly, it happened with us,” but “we had backstops of people willing to buy buyouts. It was still a bit of a hassle. Nothing works the way you thought it would.

LoanMe, Liberty Tax’s new sister company, is an online consumer loan lender. “That’s the big part of it. What LoanMe really does, it strengthens our ability to scale the lending business. They don’t have physical locations ”, yet Liberty Tax has 1,300.

LoanMe products carry interest rates of up to 98%, although they also offer a “near prime rate” of 36%. “It’s almost unfathomable for you or me to say I’m going to take a 36% APR loan, but you have to put it into perspective. The prospect is that most of the customers who need this money don’t have access to credit, ”Turner said. “What we’re trying to do is bridge the gap” and provide a short-term solution with less of an impact than, say, missing a mortgage payment or missing a rent.

NextPoint has already renamed 110 locations as Liberty Tax & Loans, which is voluntary for franchisees, but Turner said the majority were interested. The loan service will not be available in all states, “because not all states support a 36% interest rate loan.” New York has an 18% cap, ”for example. “There are also some states that are just not in favor of consumer lending. These are states in which we will remain outside. “

It is also working to strengthen services for small businesses and sole proprietorships, including things like bookkeeping and payroll built into a subscription model and including annual tax preparation.

In March, Liberty Tax sued Hewitt, its holding company Loyalty Brands and the new tax preparation franchise it acquired, ATAX, alleging a “far-reaching and continuing plan to unfairly compete with Liberty.” At the time, Hewitt called the allegations “full of lies” and claimed that Turner had perjured himself when Turner certified the claims to be true.

“I thought it was ridiculous,” Turner said of the perjury complaint when asked about the dispute in July. “These were factual allegations that I signed off, and we learned that the allegations were worse” than originally stated in the lawsuit. “Frankly, I’m pretty sad about all of this. John Hewitt and I were actually friends. When Turner started his business in 2012, he said, “Liberty Tax was my client. “

“For him to take on Liberty in this way is pretty sad because he has done a lot to build the business. It has also caused a lot of damage to the business in recent years. It took me two years to clean up the mess it created, ”said Turner, who became CEO of Liberty in 2019.

“Instead of doing some of the things he’s done, being sneaky and almost attacking Liberty from a subterfuge point of view, I wish he could hit the high road and be redeemed as a founder of the company. It’s sad, because it messed up its name with a lot of our franchisees, and I hate it, ”he said. “I am convinced that this case has teeth and merits. It is a sad situation and it is pathetic.

Turner said Franchise Group Inc. remained a major shareholder in the new company and its executives were “very interested in our success and very important in helping us continue to grow. They have been phenomenal to work with them over the past few years and will continue to be.

A Franchise Group entity, then called Vintage Capital Management, bought the shares of Liberty Tax founder Hewitt in 2018 after Hewitt was forced to step down as CEO.

In a previous interview, Hewitt called the Liberty Tax allegations “another slanderous lawsuit. It’s a bundle full of lies and exaggerations. Learn more about the dispute here.


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