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Plaid is more likely to become public than to seek another merger partner.
Thanks to NYSE
Chances are low that Plaid will seek another merger partner now that the $ 5.3 billion sale to Visa is unavailable.
Instead, the chances are that fintech will be more likely to go through a traditional initial public offering, a special-purpose acquisition vehicle or a direct listing, five fintech bankers and venture capitalists said. Barron’s.
“Plaid is likely to get IPO or get a SPAC,” a venture capitalist said.
“This is a SPAC city,” another banker added.
A plaid spokesman declined to comment.
SPACs emerged as the busiest sector of the IPO market. There were 248 so-called blank check companies that became known in 2020 – more than half of the number of stockbrokers that year – that raised $ 82.3 billion, Dealogic said. The $ 82.3 billion is nearly 50% of the $ 167.4 billion that the entire IPO market raised in 2020.
Blank-check companies were aggressive with fintechs. Earlier this month,
Social Capital Hedosophia
(ticker: IPOE), the latest blank check company of venture capitalist Chamath Palihapitiya, has agreed to merge with the online personal finance company Social Finance, or SoFi, in a $ 8.6 billion deal.
Foley Trasimene Acquisition Corp. II
(BFT), the SPAC of William P. Foley II, buys the payment platform Paysafe in December for $ 9 billion. United Wholesale Mortgage, a leading mortgage lender, merges with Gores Holdings IV (GHIV), the Gores Group’s blank check company, in a $ 16.1 billion deal. United Wholesale will trade on the New York Stock Exchange later this month.
Plaid’s platform, founded in 2013, lets users link their bank accounts to fund apps and transfer money. With Plaid’s technology, Venmo’s customers can pay their friends and family, for example. Plaid collaborates with other well-known fintechs, including the investment platform Robinhood; Transferwise, which offers international money transfers; and Coinbase, a digital currency exchange. It employs 600 people.
The San Francisco fintech raised $ 310 million in funding. That includes a $ 2.8 million seed round from 2013 and a $ 12.5 million in 2014, Crunchbase said. Both Visa (V) and
Mastercard
(MA) invested in $ 250 million in Plaid’s Series C in 2018.
“It will be difficult for Plaid investors to wait too long for an exit, given how close they got,” a second banker said, referring to the close sale to Visa.
The Plaid spokesman said its investors “are committed to supporting Plaid’s path as an independent company and our long-term growth path”.
Visa agreed in January 2020 to buy Plaid for $ 5.3 billion. The deal, which did not include a severance fee, would have been Visa’s largest ever. The companies agreed late Tuesday to end the $ 5.3 billion deal after the Justice Department sued to block the deal. The DOJ claims the acquisition will enable Visa to eliminate a competitive threat to its online debit business before Plaid gets the chance to succeed. “Now that Visa has abandoned its merger against competition, Plaid and other future fintech innovators are free to develop potential alternatives to Visa’s online debit services,” Assistant Attorney General Makan Delrahim said in a statement.
Visa said in a separate statement that he was confident he would win the litigation. But the pace of a multi-year regulatory review “was not compatible with the fast-moving realities of a start-up – and closing a year or more is not in the best interests of our customers, the financial system or the consumers themselves. not, “Zach said. Perret, Plaid’s co-founder and CEO, in a blog post.
Plaid’s customer base has grown by 60% over the past year as more people go digital, a spokesman said. The Covid-19 pandemic has caused many consumers to no longer want to use cash or physically go into bank branches. Plaid is focused on “expanding [its] products and continue to accommodate the broad growth potential that exists for Plaid as digital finance becomes more comprehensive, ”the spokesman said.
The DOJ lawsuit against Visa is the latest sign that regulators are concerned about the power that Silicon Valley giants possess
Facebook
(FB),
Microsoft
(MSFT), and
Alphabet
(GOOG). Facebook in particular has been widely criticized for spreading disinformation on its website, which allegedly contributed to the attack on the US Capitol last week.
“I’m not surprised they spoiled it,” said Matthew Epstein, managing partner and founder of Newbold Partners, a boutique fintech-focused investment bank, of the Visa Plaid merger. Regulators are concerned that large technology companies are buying new suppliers early in their life cycle, Epstein said.
“The consensus in Washington is that the monitoring rules have been inadequately enforced and that this is causing problems,” Epstein said. ‘The change in administrations will not change [the scrutiny]. Visa may have decided that this is a situation where they can not fight with the city hall. ”
Write to Luisa Beltran by [email protected]