Petal Card, a fintech valued at $800 million as recently as January 2022 before suffering a cash crunch toward the end of last year, has finally found a buyer: Empower Finance.
Terms weren’t disclosed, but the deal is believed to be for but a sliver of its lofty valuation from just two years ago. Fortune reported in November that Petal was seeking a buyer amid rumors it could shut down without additional investment. Several venture and banking executives said Tuesday that the sale to Empower was likely for a comparatively small sum. “It won’t have been much,” one VC said.
About 100 Petal employees will be joining Empower, according to a Petal spokesman, who denied that the transaction primarily was a so-called “acquihire.” Empower also announced Tuesday that it had completed its buy of Cashalo, a consumer credit and lending company located in the Philippines. Both Petal and Cashalo will be folded into Empower and not operate as independent divisions.
Founded in 2016, Petal offers Visa credit cards geared toward consumers who are new to credit, a group that often skews younger and includes recent immigrants. So far, nearly 400,000 individuals have been approved for Petal’s three cards. Empower, by comparison, was also founded in 2016. It offers products and services such as cash advances, lines of credit, and debit cards, to underserved consumers in the U.S. and Mexico.
Empower Finance—not to be confused with Empower Retirement, which acquired Prudential Financial’s retirement business for $3.5 billion in 2021 and Personal Capital in 2020—charges customers $8 per month for its services. It says it has about 2 million active subscribers and achieved profitability in 2022.
Empower shares a mission similar to Petal’s. Warren Hogarth, a former Sequoia Capital partner, cofounded Empower in 2016 with the goal of making credit more equitable and inclusive. San Francisco-based Empower has raised $174.5 million, according to Crunchbase, with investors including Sequoia, SMVentures, and Icon Ventures.
“We’ve created a new, unique system of lending that backs human endeavor and credits the working—because we believe they’re good for it,” Hogarth wrote in a LinkedIn post Tuesday. “With over 45 million Americans and billions more globally experiencing credit insecurity, Empower’s acquisition of Petal is vital and timely, leveraging our combined resources to provide better, more meaningful solutions.”
There had been talk during Petal’s recent struggles that Jason Rosen, CEO of both Petal and Prism Data—a B2B-focused data firm spun off last year—would step down from Petal. A spokesperson said he’s still with Petal and is expected to remain in place until the sale closes later this quarter.
“This merger brings together two of the leading innovators in this arena,” Rosen, also Petal’s cofounder, said in a statement.
Petal had raised more than $300 million in equity capital and over $680 million in debt financing, with investors including Peter Thiel’s Valar Ventures, River Park Ventures, and Core Innovation Capital. But with rates high and borrowing more expensive, lenders like Petal have suffered. Petal endured two rounds of layoffs, including cutting 20% of its employees in June. Staff numbered about 100 in November.
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