FinTech SPAC IPOs Face Tough 2023
For FinTechs looking to go public, 2023 will not be the year of the SPAC IPO.
If they choose to go public at all, that is.
As PYMNTS’ own data shows, the pace of SPAC deals slowed to low single digits in most cases, especially in the payments, shopping and work-related verticals.
To get a sense of some of the pressures that have hurt the SPAC landscape, Circle’s recent abandonment of its SPAC plans is illustrative.
As reported earlier this month, the digital currency firm’s plans to go public have been delayed. USD Coin (USDC) and Euro Coin (EUROC) issuer and publicly traded special purpose acquisition company (SPAC) Concord Acquisition Corp have mutually agreed to terminate their proposed business combination.
And while Circle has said that an IPO remains on the company’s roadmap, we noted that the current environment is one in which the FinTech IPO stock index has been marked by double-digit declines in individual names, depending on where you look. All told, the group has had more than 50% of the year to date.
In another example of pushback in FinTech SPACs, RXR announced on Monday (Dec 19) a move to walk away from its earlier goal of merging with a PropTech firm and will return $345m to shareholders who had been waiting for a deal was to be closed.
SPACs, facing increased regulatory scrutiny, are being pressured to rein in optimistic forecasts that used to lure investors. Not only that, but increased scrutiny leads to higher operating costs, which leads to lower margins, and thus lower returns for investors.
There are still some indications of SPAC activity here and there. As PYMNTS reported, Unique Logistics International said this week that it has signed a definitive agreement and plan to merge with SPAC Edify Acquisition Corp.
But Bloomberg noted last week that nearly 100 firms have successfully completed SPAC mergers this year, and since listing, the median loss has been 70%. That alone should be enough to scare investors. Overall funding for IPOs has fallen by 68% compared to 2021 levels.
Going the private route
We have seen a number of FinTechs choose to go public. Last week, investment firm Thoma Bravo said it would buy Coupa Software for $8 billion. In addition, EQT Private Equity acquired B2B order-to-cash software provider Billtrust for $1.7 billion in an all-cash transaction.
The move to avoid going public, or going public in the first place, prevents companies from having to satisfy investors’ fickleness through quarterly earnings reports. That’s where the “over/under” to meet and exceed analyst consensus on revenue or profitability timelines gets cumbersome, and stocks get turbulent.
By going private, there is the chance to raise the capital needed to grow into new markets as well. Call it a little shelter from the storm, at least for now.
How consumers pay online with stored credentials
Convenience prompts some consumers to store their payment information with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze the consumer dilemma and reveal how merchants can win over holdouts.
