AI provider Presto could be headed for takeover by lender

Presto is also facing delisting from the Nasdaq Stock Exchange. | Photo courtesy of Presto Automation

Presto, a provider of AI-powered voice software for chains like Carl’s Jr. and Taco John’s, is likely to face a takeover by its lender and a delisting from the Nasdaq Stock Exchange as the company tries to manage its debt and continue operating.

Lender Metropolitan Partners, which had repeatedly deferred payments on Presto’s debt, in May gave Presto the option to refinance the loan or let Metropolitan take control of the situation.

The lender’s refinancing offer involves selling $40 million of debt for $20 million and swapping the rest for equity in Presto. However, it has tasked Presto with finding a buyer for the debt.

So far, Presto and its equity partners have not received any interest in the debt from investors, and in a filing with the SEC on Thursday, they said it was “extremely unlikely” a buyer would emerge before a Sept. 15 deadline.

This would clear the way for Metropolitan to seek strategic alternatives for the company, including a sale or acquiring new investors.

“We thought it was a good deal from a company perspective,” Presto’s interim CEO Gee Lefevre said in an interview. “You have both options to make sure the company is still around, funded and moving forward.” He added that filing for bankruptcy was not an option.

However, the document warned that if a takeover occurred, holders of the company’s common stock would likely see their shares become worthless.

Lefevre said all parties would prefer to refinance and that the motion reflects progress in that effort to date. “It’s my duty to warn investors about this,” he said.

To secure financing, Presto, a publicly traded company, has reached an agreement to sell $25 million in shares to investment firm Triton Capital Partners by Dec. 31.

According to documents filed with the SEC, such a transaction in a company in Presto’s situation would “almost certainly” violate Nasdaq rules, and Presto expects its shares to be delisted on or around Aug. 8.

That wouldn’t be an unwelcome outcome for Presto, which already doesn’t meet Nasdaq rules because its shares traded below $1 for most of the past year. Last month, Presto shareholders reverse stock split approved aimed at boosting the share price, but Lefevre has not yet taken action in that direction.

“On reflection, I don’t think this company is best served on Nasdaq right now,” he said. “For a company our size and where we are in our cycle, there are a lot of fair trade requirements for a very professional exchange, and that has actually been very taxing on the business.”

Presto plans to meet with Nasdaq early next month to discuss its status.

The San Carlos, California-based company has been in a financial limbo for months amid a major shift in its business model from tablets for tableside ordering to voice-based AI for the drive-thru. The shift represents a big bet on the future of AI but has cost the company its main source of revenue in the short term.

For the current quarter, Presto expects to generate revenue of $1.6 million to $1.9 million, up from $4.8 million a year ago. The company had more than $50 million in debt as of March 31.

Still, Presto has made some commercial progress under Lefevre, who took over in February. It launched an improved version of its AI in May and last month announced a deal with a 400-unit Taco John’s.

But the company still faces a lot of uncertainty. For example, Thursday’s filing noted that a pair of Carl’s Jr. franchisees in California have halted further installations of Presto’s technology because of a lawsuit that alleged it violated state wiretapping laws. The lawsuit was withdrawn but could be refiled, the lawsuit said.

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