Dovi Frances (right) and Eynat Guez.

Dovi Frances threatening to sell Papaya holdings at 90% discount; Co-founder Guez says she’ll buy

Following a public spat with Guez, Frances sent a letter to all Papaya's shareholders offering to sell his 2.8% stake in the company for $12.5 million, which represents a company valuation of around $444 million, 90% less than the $3.7 billion Papaya was valued at in its last funding round

The background to the defamation warning Eynat Guez, co-founder and CEO of Papaya Global, issued against Dovi Frances, an investor in the company, was revealed on Tuesday. On July 28, Frances, the founder of the Group 11 investment fund, sent a letter to all Papaya shareholders offering to sell his shares in the company at a deep discount of 90% from the value of the last funding round.
This would value the human resource systems management company at only $444 million. Papaya's most recent fundraising round took place in September 2021 at a valuation of $3.7 billion.
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 מימין דובי פרנסס ו עינת גז
 מימין דובי פרנסס ו עינת גז
Dovi Frances (right) and Eynat Guez.
(Photo: Orel Cohen)
This move comes against the backdrop of a disagreement between Guez, one of the leaders of the high-tech protest against the judicial overhaul that initially announced the withdrawal of company funds from Israel, and Frances, who is known to be close to Prime Minister Benjamin Netanyahu and has held meetings with him in recent months.
"During January 2023, in a public statement while standing on the podium in a demonstration against the legal reform – a matter of intense public controversy with political implications – the company's CEO (Guez) declared her decision to withdraw the company's funds from Israel. Group 11 received no advance notice of this decision. I also responded publicly, not on the general issue, but regarding the specific action related to the company's funds. I urged Gaz not to proceed with this decision," Frances wrote in his letter to Papaya shareholders.
"To my surprise and disappointment, my expression of a differing opinion from the CEO resulted in an extreme and harsh reaction from her. She apparently chose to wage a war against Group 11 and me personally," Frances continued.
Frances added that due to the "lack of communication" with the company's management and the inability to obtain information about its activities, he is offering to sell his entire holding in the company – 10.6 million shares for $12.5 million. "The final straw was the CEO of Papaya sabotaging and continuing to sabotage our efforts to sell our holdings in the company," Frances claims.
In response to Frances' letter, Papaya issued a statement: “Papaya Global is a world leader in Payroll and Payments that shows continuous high growth rate year after year.
“Papaya Global approached Group 11 months ago with an offer to buy its holdings. Eynat Guez was personally leading a group of investors to acquire all shares. All attempts by Dovi Frances to tarnish Eynat following his recent remarks are simply ridiculous.
“The announcement was shared with the media before it was received by Papaya Global, and demonstrates Mr. Frances’s conduct, and his choice to pursue personal battles over the benefit of his investors.
“A group of investors led by Eynat Guez is happy to purchase the shares at bargain prices. As the saying goes, the end of an act is measured by forethought.”
Frances acquired his shares through a secondary transaction in May 2020. Later, Group 11 increased its holdings in Papaya in subsequent fundraising rounds and invested an additional $8.2 million, resulting in a 2.8% stake in the company today. Frances added that if the existing substantial shareholders do not accept his offer to buy the shares, he will extend the offer to Alan Feld of Vintage Investment Partners, Erez Shachar and Sivan Shamri Dahan from the Qumra fund, and Rona Segev and Eitan Bek from TLV Partners.
This list of names is not coincidental and is closely tied to their political positions against the judicial coup, in contrast to Frances himself. "These parties have expressed their trust and support for the CEO, her actions, and her leadership of the company in recent months. Consequently, we assume they will eagerly seize the opportunity to acquire our holdings at a 90% discount," Frances wrote, adding that the offer is valid until Monday, September 4th.
Three days after sending the letter that was revealed today, Guez sent a warning letter to Frances, threatening to file a defamation lawsuit. Guez demanded a public apology and clarification from Frances for his claims that she endangered the company's funds by transferring them to the now-collapsed Silicon Valley Bank. The warning letter also stated that any funds received through the lawsuit will be contributed to the protest against the judicial overhaul and in support of democracy.
The letter addressed a series of statements made by Frances against Guez. In January, Guez tweeted from her personal account that Papaya Global would withdraw funds from Israel if the judicial overhaul proceeded as planned.
Around a month and a half later, after SVB's collapse, Frances published a post in which he claimed that there are heads of Israeli unicorns that are "very determined and verbal entrepreneurs who transferred billions of dollars there (SVB) recently as part of a move to withdraw funds from Israel in order to express a position and fight the reform.” In doing so, Guez claims that he linked her actions to the collapsing bank and even claimed that she encouraged others to deposit their money in SVB.
In a subsequent interview, Frances referred to Guez's statement as "unfortunate" and claimed she did not consult with anyone before making her decision.
Furthermore, Guez's letter alleges that Frances misrepresented himself as a member of Papaya's management, which he is not, and that he blamed Guez's decisions for investor losses. However, in reality, Frances's fund has already made significant profits from its investment in Papaya and even sold some holdings at a substantial profit.