Troubled Israeli startup MyCheck, which developed a mobile payment app, received a stay of proceedings order from the Tel Aviv District Court Monday.
The company’s digital wallet enables quick payments through smartphones in restaurants and hotels. The company had raised about $20 million since its founding, attracting investors such as model Bar Refaeli; MyCheck co-founder Asaf Talmor Wertheimer; Saban Capital Group; Priceline; and Santander’s Innoventures Fund. Santander, which led the last financing round in 2015, vetoed a new funding proposal.
The order notes that the company is in need of significant external financing to continue operating. “A liquidity problem for the company was created in part by a refusal by some of the shareholders to invest funds, causing a dilution of shares of those shareholders who didn’t participate in the investment,” the company stated in its petition. “Also, some of the shareholders have a veto right on investing and recruiting investors. For these reasons, the company ran into liquidity difficulties and there is a fear that it will not be able to meet its ongoing obligations. For now there are no lawsuits against it.”
The petition for a stay of proceedings is meant to allow the company to continue operating while holding onto its assets and to buy time to find investors or sell off some of its operations. Otherwise, it is liable to collapse to the detriment of its creditors and employees. The request filed on behalf of the company stressed that there is interest in acquiring the company for more than the sum of its debts.
According to the petition, travel giant Priceline, which also owns kayak.com and booking.com, signed an investment deal with MyCheck with an option to acquire the startup “for tens of millions of dollars, in line with reaching milestones and continued partnership and development — as well as a ban on selling the company to a third party on certain conditions, and a certain exclusivity regarding investments in the company.”
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The petition stated that for various reasons, the option to acquire the company was not exercised and Priceline made an initial offer that was much lower, which the company and other shareholders rejected in recognition of its much higher valuation. “The company expected its purchase by Priceline and worked toward acquisition,” noted the petition.
The court granted the company’s request and appointed attorney Hanit Nov as trustee during the stay of proceedings, which was given until March 28.
MyCheck, one of the first mobile wallet companies in Israel, was founded by Talmore Wertheimer, Erez Sptatz, Shlomit Kugler and Tal Zvi Nathanel. The company employs 47 people in Israel and abroad, but the application is not available in Israel. Revenues totaled $3.5 million in 2017. The company adds a payment option for businesses. “Every product begins with a need, and the need is not to wait for the bill,” Kugler, MyCheck’s CEO, once said. “The company wants to be the Gett of the food service industry and to make the payment experience interactive, rich in features and fun.”
Users who download the MyCheck app enter the credit card information once, after which they can pay at businesses supporting the service. Customer send a code to the server and can see their bill accumulate on their phone, through which they pay and leave a tip. They receive bill details by email. The company launched an advertising campaign in 2012 starting Refaeli and comedian Roy Kafri.
Hayut Greenberg, a lawyer representing company workers, commented: “Employees really believe in the company and they regret the situation it has fallen into. We rely on the appointed trustee, and we will make every effort together with her to avoid causing damage and to keep business going on as usual. Still, everybody needs to be aware of the fact that we are close to paying January salaries, and they need to be taken care of first and foremost.”