Paymentus Holdings (PAY) Risk Analysis

Our certificate of incorporation and bylaws contain anti-takeover provisions that could discourage, delay or prevent a change of control or changes in management. These provisions include: - Our dual class common stock structure with differing voting rights. - The board of directors is divided into three classes, each standing for election once every three years. - Vacancies on the board and newly created directorships can only be filled by a majority vote of directors then in office, even if less than a quorum. - The authorized number of directors can only be changed by board resolution. - The absence of cumulative voting. - The board's ability to issue "blank check" preferred stock to implement a stockholder rights plan. - The board's power to adopt, alter or repeal our bylaws. - Requirements for stockholders seeking to present proposals or nominate directors to provide timely notice and meet specific form and content requirements. - The forum for certain litigation against us is restricted to Delaware. Additional provisions will become effective when AKKR ceases to beneficially own at least 50% of the voting power of our common stock, including: - Stockholders may not call special meetings or act by written consent. - Directors may only be removed for cause and with the affirmative vote of at least a majority of the voting power of our outstanding capital stock. - Amending certain provisions of our certificate of incorporation and bylaws will be subject to super-majority voting thresholds. Our certificate of incorporation also provides protections similar to Section 203 of the Delaware General Corporation Law (DGCL) preventing us from engaging in a business combination with certain 15% stockholders (excluding AKKR) for a period of three years from the date the stockholder acquired such ownership unless prior approval from our board or stockholders is obtained. In addition, certain state laws may discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. Any provision of our organizational documents or state law that delays or deters a change in control could limit the opportunity for stockholders to receive a premium for their shares and could also affect the price investors are willing to pay for our Class A common stock.

Based on the continued control of a majority of the voting power of our outstanding common stock by AKKR, we continue to qualify as a "controlled company" under NYSE corporate governance rules. As a controlled company, we are not required to have a majority independent board of directors, an independent compensation committee or an independent nominating function. While we have not currently elected to take advantage of the NYSE's "controlled company" exemption, we could elect to do so in the future for so long as AKKR continues to control a majority of the voting power of our outstanding common stock. If the interests of our management and AKKR differ from those of other stockholders, those stockholders may not have the same protections as stockholders of fully compliant public companies. Our controlled company status could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

The trading market for our Class A common stock is influenced by the research and reports published by securities or industry analysts. If one or more analysts provide an unfavorable rating, downgrade our stock, provide a more favorable recommendation about competitors or publish inaccurate or unfavorable research about us, our Class A common stock price would likely decline. In addition, the market expects us to meet or exceed guidance in all financial measures to which we publicly guide. If our actual results are below or do not sufficiently exceed our guidance or our analysts' forecasts, or if our future guidance is not perceived favorably by the market, the price of our Class A common stock could decline significantly.

AKKR, our controlling stockholder, is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that would be complementary to our business if we acquired them. Our certificate of incorporation provides that, to the fullest extent permitted by law, none of AKKR or its affiliates, or any of their respective directors, partners, principals, officers, members, managers or employees, including any of the foregoing who serve as our officers or directors (all of whom we refer to as the "Exempted Persons"),has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our affiliates. In addition, to the fullest extent permitted by law, in the event that any Exempted Person is presented with a business opportunity, even if the opportunity is one that we or our affiliates might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, such Exempted Person has no duty to communicate or offer such business opportunity to us or any of our affiliates. No Exempted Person will be liable to us, any of our affiliates or our stockholders for breach of any fiduciary or other duty, solely by reason of the fact that any such Exempted Person pursues or acquires such business opportunity, sells, assigns, transfers or directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us or any of our affiliates. These provisions could create conflicts of interest and have a material adverse effect on our business, results of operations, financial condition and prospects if attractive business opportunities are allocated by AKKR or another Exempted Person to itself, its affiliates or third parties instead of to us.

As of December 31, 2025, AKKR controlled approximately 58% of the voting power of our outstanding common stock. As a result, AKKR has the ability to elect all of the members of our board of directors and thereby control our policies and operations, including the appointment of management, future issuances of our Class A common stock or other securities, the payment of dividends, if any, on our Class A common stock, the incurrence of debt by us, amendments to our certificate of incorporation and bylaws, and the entering into extraordinary transactions, and the interests of AKKR may not in all cases be aligned with our or your interests. AKKR may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment in us, even though such transactions might involve risks to you. For example, AKKR could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets. Moreover, AKKR will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any acquisition of our company. This concentration of voting control could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of our company and ultimately might affect the market price of our Class A common stock. So long as AKKR continues to beneficially own a sufficient number of shares of Class B common stock, even if it beneficially owns significantly less than 50% of the shares of our outstanding common stock, it will continue to be able to effectively control our decisions. For example, if our Class B common stock amounted to 15% of our outstanding common stock, beneficial owners of our Class B common stock (including AKKR), would collectively control approximately 64% of the voting power of our common stock. Moreover, AKKR will continue to have the right to nominate directors to our board of directors under our stockholders agreement for so long as AKKR beneficially owns at least 5% of our outstanding common stock. For the years ended December 31, 2025 and 2024, AKKR distributed to its investors, on a pro rata basis and for no additional consideration, 47,415,984 and 15,844,426 shares, respectively, of our Class B common stock, some of which was subsequently converted into shares of our Class A common stock. There can be no assurance regarding the further disposition of these shares by the recipients, future distributions of our Class B common stock held by AKKR, or subsequent conversion by recipients of distributed Class B shares into our Class A common stock or disposition thereof.

Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, AKKR and our founder and chief executive officer collectively controlled approximately 89% of the voting power of our outstanding common stock as of December 31, 2025 and therefore are able to control all matters submitted to our stockholders, including the election of directors, amendments of our organizational documents, compensation matters and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. Further, the stockholders agreement we entered into with AKKR at the time of our IPO in May 2021 provides that, for so long as AKKR or certain of its permitted transferees hold more of our outstanding common stock than Mr. Sharma and certain of his affiliates, AKKR has the right to nominate (x) five directors to our board of directors for so long as AKKR beneficially owns at least 10% of our outstanding common stock and (y) two directors to our board of directors for so long as AKKR beneficially owns at least 5% but less than 10% of our outstanding common stock. Moreover, after such time as AKKR ceases to hold more of our outstanding common stock than Mr. Sharma and certain of his affiliates, AKKR will continue to have the right to nominate two directors to our board of directors until such time as AKKR ceases to beneficially own at least 5% of our outstanding common stock. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as transfers to affiliates, members or partners of AKKR and transfers for estate planning purposes so long as the transferring holder retains exclusive voting and dispositive power with respect to the shares transferred. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. In addition, we are subject to pressure from certain institutional investors to sunset our dual-class structure. The effect of continued institutional investor dissatisfaction may depress our valuation, preclude investment by passive funds and make our Class A common stock less attractive to other investors, thereby adversely affecting the market price of our stock. Certain index providers, such as FTSE Russell and S&P Dow Jones, have historical or existing policies that restrict or prohibit the inclusion of companies with multiple-class share structures in their flagship indexes. While some of these providers have recently modified their eligibility criteria, there is no guarantee that our Class A common stock will be included in these or other indexes now or in the future.

Future issuances of shares of our Class A common stock, including in connection with acquisitions, could depress the market price of our Class A common stock and result in dilution to existing holders of our Class A common stock. Future grants of equity-based awards will also cause dilution. Furthermore, we may issue additional equity or convertible securities that could have rights senior to those of our Class A common stock. Sales of a substantial number of shares of our Class A common stock, particularly by directors, executive officers and principal stockholders, or the perception that such sales may occur, could cause the market price of our Class A common stock to fall. As of December 31, 2025, we had 62,459,587 shares of Class A common stock and 63,121,661 shares of Class B common stock outstanding. In addition, 2,766,276 shares of Class A common stock and 3,443,585 shares of Class B common stock were subject to outstanding equity awards as of December 31, 2025. Shares subject to outstanding equity awards, as well as those reserved for issuance, are generally eligible for resale in the public markets, subject to limitations for affiliates. The sale or perceived sale of these additional shares could cause the market price of our Class A common stock to decline. In addition, up to 1,193,880 shares of Class A common stock may be issuable under warrant agreements with JPMC Strategic Investments I Corporation, which will become eligible for sale in the public market. Our founder and CEO, AKKR and certain current and former executive officers have registration rights that allow them to require us to file registration statements for the public resale of their shares, including shares issuable upon conversion of Class B shares, or to include such shares in registration statements that we may file. If these shares are registered, they can be freely sold in the public market, which could adversely affect the market price of our Class A common stock.