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Plaid is more likely to go public than to look for another merger partner.
Credit to NYSE
Plaid is unlikely to seek another merger partner now that the $ 5.3 billion sale to Visa has ended.
Instead, the fintech is more likely to go public through a traditional IPO, a special purpose acquisition vehicle or a direct listing, five fintech bankers and venture capitalists said. Barron’s.
“Plaid will likely get an IPO or get a SPAC,” said a venture capitalist.
“It’s SPAC town,” added another banker.
A Plaid spokeswoman declined to comment.
SPACs have emerged as the busiest sector of the IPO market. There were 248 so-called blank check companies that went public in 2020 – more than half of all IPOs that year – raising $ 82.3 billion, Dealogic said. The $ 82.3 billion is nearly 50% of the $ 167.4 billion the entire IPO market raised in 2020.
Blank check companies are aggressive with fintechs. Earlier this month,
Social capital Hedosophia
(ticker: IPOE), venture capitalist Chamath Palihapitiya’s newest blank check company, agreed to merge with online personal finance firm Social Finance, or SoFi, in a $ 8.6 billion deal.
Foley Trasimene Acquisition Corp. II
(BFT), William P. Foley II’s SPAC, buys payment platform Paysafe for $ 9 billion in December. 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 transaction. United Wholesale is scheduled to trade on the New York Stock Exchange later this month.
Founded in 2013, Plaid’s platform allows users to connect their bank accounts to fund apps and transfer money. For example, with Plaid’s technology, Venmo customers can pay their friends and family. Plaid partners with other well-known fintechs, including investment platform Robinhood; Transferwise, which offers international money transfers; and Coinbase, a digital currency exchange. It employs 600 people.
San Francisco’s fintech has raised $ 310 million in funding. That includes a $ 2.8 million seed round from 2013 and a $ 12.5 million round from 2014, Crunchbase said. Both Visa (V) and
MasterCard
(MA) invested in Plaid’s $ 250 million Series C round in 2018.
“It will be difficult for Plaid investors to wait too long for an exit, given how close they got,” said a second banker, referring to the near-sale to Visa.
Plaid’s spokeswoman said the investors are “committed to supporting Plaid’s path as an independent company and our long-term growth trajectory.”
Visa agreed in January 2020 to buy Plaid for $ 5.3 billion. The deal, at no cost to the breakup, would have been Visa’s largest ever. The companies agreed late Tuesday to end the $ 5.3 billion transaction after the Justice Department sued to block the deal. The DOJ claimed the acquisition would allow Visa to rule out a competitive threat to its online debit business before Plaid had a chance of success. “Now that Visa has abandoned its anti-competitive merger, 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 it was confident it would have won the lawsuit. But the pace of a multi-year regulatory overhaul “was inconsistent with the rapidly changing reality of a startup – and delaying the shutdown for another year or more is not in the best interest of our customers, the financial system or consumers themselves” , Zach Perret, co-founder and CEO of Plaid, said in a blog post.
Plaid’s customer base has grown by 60% in the past year as more people have gone digital, a spokeswoman said. The Covid-19 pandemic has resulted in many consumers no longer wanting to use cash or physically enter bank branches. Plaid is aimed at ‘expanding’ [its] products and continues to meet the generous growth potential that exists for Plaid as digital finance increasingly pervades, ”said the spokeswoman.
The DOJ lawsuit against Visa is the latest sign that regulators are concerned about the power of Silicon Valley giants such as
Facebook
(FB),
Microsoft
(MSFT) and
Alphabet
(GOOG). Facebook, in particular, has been criticized for spreading disinformation on its site, which is said to have contributed to the attack on the US Capitol last week.
“I’m not surprised they sunk it,” said Matthew Epstein, managing partner and founder of Newbold Partners, a fintech-focused boutique investment bank, of the Visa-Plaid merger. Regulators are concerned that major tech companies are buying up new providers early in their lifecycles, Epstein said.
“The consensus in Washington is that there has been insufficient enforcement of antitrust rules and this is causing problems,” said Epstein. “The change in administrations will not change [the scrutiny]. Visa may have decided that this is a situation where they cannot fight City Hall. “
Write to Luisa Beltran at [email protected]