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Investor floats dumping Papaya Global shares in row over judicial reform

Group 11's Dovi Frances accuses Papaya Global CEO of making business decisions based on her personal ideology.

Papaya Global CEO Eynat Guez (left) and Group 11 founding partner Dovi Frances. Source: Papaya Global, Group 11.
Papaya Global CEO Eynat Guez (left) and Group 11 founding partner Dovi Frances. Source: Papaya Global, Group 11.

A public dispute between Papaya Global’s CEO Eynat Guez and an investor, venture capitalist Dovi Frances, kicked up a notch as the latter offered to sell his shares in the Israeli firm at an 88% discount.

Frances offered to sell to Guez and the company’s other shareholders his holdings in Papaya at a price that values the payroll and payments service provider at $444 million, or 12% of its current market valuation of $3.7 billion, according to Channel 11‘s Avishai Grinzaig on Tuesday.

“The group of investors led by Eynat Guez is happy to buy the shares at a bargain price,” Guez tweeted in reply on Tuesday.

In July, Guez also sent a warning letter about initiating a defamation case against Frances, and demanded he apologize for his public criticism, referring specifically to a comment he made in a Channel 13 interview that Guez was acting out of “personal caprice—a whim that does not stem from a business motive but a political motive.”

Frances also said that Guez was encouraging a “run on the bank.” 

Israeli business site Globes reported that Frances said that if the other shareholders don’t purchase his shares, he will offer them to business executives who have criticized him for questioning Guez’s conduct.

“In recent months, these parties have expressed their trust and support in the CEO and the way she leads the company, and accordingly we assume that they will jump at the opportunity to purchase holdings in the company at a discount,” Frances wrote.

Globes listed those high-tech executives as Alan Feld, founder of Vintage Investment Partners, Erez Shachar, co-founder at Qumra Capital and TLV Partners co-founder Rona Segev, among others.

Another critic, Ronen Nir, managing director at PSG Equity, tweeted on Jan. 26: “Dovi Frances went from a shark to a sardine in a day,” referring to Frances’s participation as an investor on “The Sharks,” the Israeli version of the business reality show “Shark Tank.”

Frances complained that his company, Group 11, had “communication difficulties” with Papaya Global since the start of 2023 despite the fact that the company “is obligated to provide information” about its affairs “and even though the fund is entitled to be invited to all the official or unofficial meetings.”

He said the final straw was the ongoing efforts by Papaya’s CEO to “sabotage” Group 11’s efforts to sell its holdings—”she refuses to cooperate not only with us but also with third parties and others and to provide the information required in order to allow a sell transaction.”

Frances and Guez have been sparring since January on the background of the judicial reforms when Guez, who has been an outspoken critic of the initiative, announced on Jan. 26 that her company would pull all its funds from Israel.

Guez founded Papaya Global in 2016. She’s the first woman to lead an Israeli unicorn, a privately held startup valued at over $1 billion.

Frances, an Israeli-American whose Group 11 is based in Los Angeles, responded in a Channel 12 interview on Jan. 26 to Guez’s threat that he worried Guez was driven by political rather than professional business considerations.

“What bothers me is the use of a bank account of a company that raised money from investors from across the political spectrum. Taking money from deposits and using the implied, or not implied, threat for political purposes doesn’t find favor in my eyes,” Frances told Channel 12.

“I have a lot of professional respect for Eynat, but if you want to play politics, take off your CEO’s hat and put it aside,” he said. “If you want to be the CEO of a company, then manage the company.”

In an April interview, Frances said that he was actually against parts of the judicial reform and that he never attacked Guez personally, whom he considers a worthy CEO, only her statement about pulling her firm’s money out of Israel, explaining, “You don’t put pressure on banks in order to create a situation where banks collapse.”

Israel’s high-tech industry “is 15% of Israel’s Gross National Product. If we pull our money out of here, we’ve eliminated the economy,” Frances said.

In February, Ynet, citing unnamed banking sources, said that some 50 high-tech companies withdrew $4 billion from Israel and put it into foreign banks.

Ironically, one of those was Silicon Valley Bank (SVB), a specialized bank that catered to the high-tech industry and had a branch in Tel Aviv. SVB collapsed in a space of 36 hours as customers engaged in a run on the bank, fearing it would become insolvent. Regulators shut down the bank on March 10.

On March 11, Netanyahu recognized that SVB’s collapse put pressure on high-tech firms globally. “If necessary, out of responsibility to Israeli high-tech companies and employees, we will take steps to assist the Israeli companies, whose center of activity is in Israel, to weather the cash-flow crisis that has been created for them due to the turmoil,” he tweeted.

Israeli banks stepped in to help; Guez thanked them in a tweet, though without acknowledging Netanyahu’s role:

“Bank Discount and Bank HaPoalim are taking amazing steps in supporting Israeli companies—immediate loans to companies alongside bridging loans for employees whose wages will be delayed by companies due to the collapse of SVB. This is what real leadership looks like. Thank you for the example and the lead!”

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