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Plaid are more likely to go public than seek another merger partner.
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Odds are low that Plaid will seek out another merger partner now that its $ 5.3 billion sale to Visa has been turned off.
Instead, fintech is more likely to be listed via a traditional IPO, a special-purpose acquisition vehicle or a direct listing, five fintech bankers and venture capitalists said Barrons.
“Plaid is likely to list or get SPAC,” said one venture capitalist.
“It’s SPAC city,” added another banker.
A Plaid spokeswoman declined to comment.
SPACs have emerged as the busiest sector in the IPO market. There were 248 so-called blank check companies listed in 2020 – more than half the number of all IPOs that year – raised $ 82.3 billion, Dealogic said. $ 82.3 billion. Is almost 50% of the $ 167.4 billion raised by the entire IPO market in 2020.
Blank-check companies have been aggressive with fintechs. Earlier this month
Social capital hedosophy
(ticker: IPOE), the latest blank check company from venture capitalist Chamath Palihapitiya, agreed to merge with online personal finance company Social Finance or SoFi in a $ 8.6 billion deal. $.
Foley Trasimene Acquisition Corp. II
(BFT), SPAC from William P. Foley II, buys payment platform Paysafe for $ 9 billion in December. United Wholesale Mortgage, a leading mortgage lender, merges with Gores Holdings IV (GHIV), the blank check firm of Gores Group, in a $ 16.1 billion transaction. United Wholesale is scheduled to trade on the New York Stock Exchange later this month.
Founded in 2013, the Plaids platform lets users connect their bank accounts to fund apps and transfer money. For example, Plaid’s technology lets Venmo’s customers pay their friends and family. Plaid works 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 fintech has raised $ 310 million in funding. That includes a $ 2.8 million seed round from 2013 and a $ 12.5 million round in 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 came,” said another banker, referring to the closest sale to Visa.
The Plaid spokeswoman said its investors “are committed to supporting Plaid’s path as an independent company and our long-term growth path.”
In January 2020, Visa agreed to buy Plaid for $ 5.3 billion. The agreement, which did not include a division fee, would have been Visa’s largest ever. The companies agreed late Tuesday to close the $ 5.3 billion deal after the Justice Department sued to block the deal. The DOJ argued that the acquisition would allow Visa to eliminate a competitive threat to its online debit business before Plaid had a chance to succeed. “Now that Visa has abandoned its anti-competitive merger, Plaid and other future fintech innovators are free to develop possible alternatives to Visa’s online billing services,” Assistant Attorney General Makan Delrahim said in a statement.
Visa said in a separate statement that it was convinced it would have won the lawsuit. But the pace of a multi-year regulatory review “was not compatible with the rapid realities of a start-up – and it is not in our customers ‘, the financial system’s or consumers’ own interest to delay close to another year or more,” said Zach Perret, Plaids. co-founder and CEO, 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 caused many consumers to stop spending cash or physically entering bank branches. Plaid is focused on “expanding [its] products and continue to meet the generous growth potential that exists for Plaid as digital financing becomes more widespread, ”the spokeswoman said.
The DOJ lawsuit against Visa is the latest sign that regulators are concerned about the power of Silicon Valley giants like
Facebook
(FB),
Microsoft
(MSFT) and
Alphabet
(GOOG). Facebook in particular has been widely criticized for letting disinformation spread on its website, which is said to have contributed to the attack on the US capital last week.
“I’m not surprised they got it,” said Matthew Epstein, managing partner and founder of Newbold Partners, a boutique fintech-focused investment bank, about the merger with Visa-Plaid. Regulators are concerned that large technology companies are buying up new entrants early in their life cycle, Epstein said.
“The consensus in Washington is that there has been insufficient enforcement of antitrust rules 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 the town hall. ”
Write to Luisa Beltran at luisa.beltran@dowjones.com
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