A data storage company under pressure from lawmakers to repay a loan it received from the federal paycheck protection program, which the government created to help small businesses affected by the, says he keeps the money.
Quantum, one of five public companies surveyed byto repay their funding “immediately,” told CBS MoneyWatch that he planned to respond to the letter from the coronavirus select subcommittee but did not plan to repay the loan. Another company pointed out by the panel, MiMedx, announced Friday night that it would pay off its PPP loan within hours of receiving the letter from House lawmakers.
The subcommittee has set Monday as the deadline for businesses to declare repaying loans they have received from the Small Business Relief Fund. Otherwise, the subcommittee said companies should explain in writing why they are eligible for the program, as well as produce related documents, by May 15.
The Paycheck program offers low interest government guaranteed loans for businesses with 500 or fewer employees. Loans do not have to be repaid if companies retain employees and use 75% of the proceeds on payroll. The subcommittee’s actions follow widespread outrage over hundreds of state-owned enterprises appealing to the emergency relief fund. Many small businesses say to get help from the program.
“Quantum will respond and look forward to engaging with the committee,” the company said through a spokesperson. “Quantum believes it has a duty to its US employees who would lose their jobs if Quantum returned its PPP loan to demonstrate why Quantum not only meets the technical eligibility requirements of the PPP loan program, but also falls within the scope of the ‘spirit of what was planned by the [Coronavirus Aid, Relief and Economic Security Act]. “
The five companies targeted by the select subcommittee received $ 10 million from the paycheck protection program. In his letter to Quantum, the panel said the intent of the CARES Act was to “provide an invaluable lifeline for small businesses that might otherwise be forced to lay off employees or shut down altogether.”
The letter also stated that Quantum has 800 employees and the ability to raise funds from existing investors. “We call on you to return the funds immediately,” read the letter, which was signed by seven House Democrats, including the chairman of the subcommittee, Rep. Jim Clyburn of South Carolina.
The $ 10 million loan to Quantum was highlighted by CBS MoneyWatch in an April article on Large Businesses Obtaining Small Business Assistance Fund Loans. As of Monday, Quantum had a market cap of $ 173 million. The company reported 2019 revenue of $ 418 million and operating profit of just over $ 19 million. A post on the company’s website said Quantum is open for business and “employees are expected to work remotely.”
Quantum’s largest shareholder is B. Riley Capital Management, a $ 500 million buyout investment fund that recently held just over 21% of the stockholder’s stock. At the end of April, Craig Ellis, an analyst at an investment bank affiliated with B. Riley, B. Riley FBR, issued a “buy” note on Quantum shares. Ellis said he expected the company’s operating profits to increase by almost 30% over the next 12 months.