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Plaid is more likely to go public than to look for another partner for the merger.
Courtesy of NYSE
Chances are low that Plaid will look for another partner for the merger now that its $ 5.3 billion sale to Visa is closed.
Instead, fintech is more likely to go public through a traditional initial public offering, a special purpose acquisition vehicle or a direct listing, said five fintech bankers and venture capitalists Barron’s.
“Plaid is likely to IPO or get SPAC,” said a venture capitalist.
“It’s the 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 that went public in 2020 – more than half the number of all IPOs that year – raising $ 82.3 billion, Dealogic said. The $ 82.3 billion represents 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,
Hedosophia Capital Social
(ticker: IPOE), the latest blank check company by venture capitalist Chamath Palihapitiya, has agreed to merge with online personal finance company Social Finance, or SoFi, into a $ 8.6 billion deal.
Foley Trasimene Acquisition Corp. II
(BFT), William P. Foley II’s SPAC, is buying the Paysafe payment platform for $ 9 billion in December. United Wholesale Mortgage, a major mortgage lender, is merging with Gores Holdings IV (GHIV), the Gores Group’s blank check company, in a $ 16.1 billion transaction. United Wholesale is expected 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 finance applications and transfer money. For example, Plaid’s technology allows Venmo customers to pay their friends and family. Plaid works with other well-known fintechs, including the Robinhood investment platform; Transferwise, which offers international money transfers; and Coinbase, a digital exchange bureau. It employs 600 people.
San Francisco’s fintech raised $ 310 million in financing. That includes a $ 2.8 million seed round as of 2013 and a $ 12.5 million round in 2014, Crunchbase said. 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 long for an exit, given how close they have come,” said a second banker, referring to the near-sale to Visa.
The Plaid spokeswoman said her 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 separation fee, would have been Visa’s largest. The companies agreed on Tuesday to close the $ 5.3 billion deal after the Justice Department filed a lawsuit to block the deal. The DOJ claimed 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 potential alternatives to Visa’s online debit services,” said Assistant Attorney General Makan Delrahim in a statement.
Visa, in a separate statement, said it was confident it would have won the dispute. But the pace of a multi-annual regulatory review “was not compatible with the rapidly changing reality of a startup – and postponing closure for another year or more is not in the interest of our customers, the financial system or the consumers themselves,” he said. Zach Perret, co-founder and CEO of Plaid, in a blog post.
Plaid’s customer base grew 60% last year as more people went digital, a spokeswoman said. The Covid-19 pandemic has meant that many consumers no longer want to use money or physically enter bank branches. Plaid is focused on “building [its] products and continuing to accommodate the generous growth potential that exists for Plaid as digital finance becomes more widespread, ”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, was widely criticized for allowing disinformation to spread on its website, which would have contributed to the attack on the United States Capitol last week.
“I’m not surprised that they’re done with this,” said Matthew Epstein, managing partner and founder of Newbold Partners, a fintech-focused boutique investment bank in the Visa-Plaid merger. Regulators are concerned that large technology companies are buying up new nascent suppliers 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,” said Epstein. “The change in administrations is not going to change [the scrutiny]. Visa may have decided that this is a situation in which they cannot fight City Hall. “
Write to Luisa Beltran at [email protected]