Axios Pro: Fintech Deals

January 19, 2022

Axios Pro Exclusive Content

Situational awareness: Welcome to your first edition of this Axios Pro newsletter.

  • You've got Ryan Lawler and Lucinda Shen here as your partners-in-crime for this newsletter. Our aim: To bring you a clear and concise one-sheet on everything you need to know in fintech for the day.
  • We want this conversation to go two ways. Feel free to slide into our DMs (Ryan is here and Lucinda is here). Or just respond to this email with tips, thoughts, feedback, and even disagreements. It'll come straight into our inboxes. 😉

Save the date: Register for tomorrow’s virtual kickoff event, where Ryan will interview Affirm CEO Max Levchin about the company’s  ambitions.

Alright, let's start 2022 off with a bang — or, rather, a splat.

1 big thing: Fintech SPACs go splat

Data: Yahoo Finance; Chart: Axios Visuals

Mobile investing startup Acorns Grow scrapped plans to go public via SPAC, calling off its $2.2 billion merger with Pioneer Merger Corp.

Why it matters: The decision was made at the same time private valuations continue to skyrocket, which Acorns CEO Noah Kerner acknowledged in a statement announcing the news.

  • “Given market conditions, we will be pivoting to a private capital raise at a higher pre-money valuation as we continue on our path to 10 million paid subscribers saving and investing for a better future,” Kerner said.

Context: 2021 was a banner year for private investment in fintech, as the sector drew a record number of VC dollars chasing a record number of VC deals. The same was not true for companies entering the public markets.

  • According to SPAC Insider, fintech companies going public via a SPAC in 2021 lost an average of 40% in value since the day of their first trade.
  • It's not just SPACs: For the broader fintech sector, IPO listings (excluding insurtechs and proptechs) are down an average of 35.4% since their first-day closing price, according to Renaissance Capital.
  • Yes, the selloff is due to macroeconomic factors like expectations of higher interest rates in part — but fintechs also simply ran too hot in 2021 as retail traders flocked to the sector.

Acorns isn't alone in canceling its SPAC. After spending eight months trying to close a deal with Northern Star Investment Corp. II, RIA custodian Apex Clearing terminated its SPAC agreement in December.

  • But more SPACs are waiting in the wings. Aspiration, Better.com and eToro all announced mergers with blank-check companies last year, but their likelihood of completion seems to diminish every day. eToro's valuation took a 15% haircut before it even hit the public markets.

The bottom line: More companies are expected to delay or cancel SPAC plans citing market conditions, but they can't stay private forever. Eventually, their investors are going to want some liquidity.

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