Plea likely to go public after sales to Visa fail

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Chances are low that Plaid is looking for another merger partner now that its $ 5.3 billion sale to Visa is complete.

Instead, fintech is more likely to go public through a traditional initial public offering, special-purpose acquisition vehicle, or direct listing, five fintech bankers and venture capitalists said. Barron’s.

“Plaid is likely to go public or get PSPC,” said a venture capitalist.

“This is the city of SPAC,” added another banker.

A spokeswoman for Plaid declined to comment.

PSPCs have become the most active sector of 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 – for a raise of $ 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,

Hedosophy of social capital

(ticker: IPOE), venture capitalist Chamath Palihapitiya’s latest blank check firm, has agreed to merge with online personal finance firm Social Finance, or SoFi, in $ 8.6 billion deal of dollars.

Foley Trasimene Acquisition Corp. II

(BFT), William P. Foley II’s SPAC, buys the Paysafe payment platform for $ 9 billion in December. United Wholesale Mortgage, a leading mortgage lender, is merging with Gores Holdings IV (GHIV), the Gores group’s blank check company, in a $ 16.1 billion deal. United Wholesale is expected to trade on the New York Stock Exchange later this month.

Founded in 2013, the Plaid platform allows users to connect their bank accounts to fund apps and transfer money. For example, Plaid 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 currency exchange. It employs 600 people.

San Francisco-based fintech has raised $ 310 million in funding. This includes a round of funding of $ 2.8 million from 2013 and a round of $ 12.5 million in 2014, Crunchbase said. Visa (V) and

MasterCard

(MA) invested in Plaid’s $ 250 million Series C in 2018.

“It will be difficult for Plaid investors to wait too long for an exit given their proximity,” said a second banker, referring to the close sale to Visa.

The spokesperson for Plaid said its 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 break-up fee, was reportedly the largest ever signed by Visa. The companies agreed Tuesday night to end the $ 5.3 billion transaction after the Justice Department filed a lawsuit to block the deal. The DOJ alleged that the acquisition would allow Visa to eliminate a competitive threat to its online debit business before Plaid has 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,” Deputy Attorney General Makan Delrahim said in a statement.

Visa, in a separate statement, said she was confident she would have won the case. But the pace of a multi-year regulatory review “was not compatible with the fast-paced realities of a startup – and delaying closure for a 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 60% over the past year as more people have gone digital, a spokesperson said. The Covid-19 pandemic has caused many consumers to no longer want to use cash or physically enter bank branches. Plaid focuses on ‘the construction [its] products and continue to embrace the generous growth potential that exists for Plaid as digital finance becomes more ubiquitous, ”the spokesperson said.

DOJ’s lawsuit against Visa is the latest sign regulators are concerned about the power held by Silicon Valley giants like

Facebook

(FB),

Microsoft

(MSFT), and

Alphabet

(GOOG). Facebook in particular has been widely criticized for allowing disinformation to spread on its site, which allegedly contributed to the attack on the U.S. Capitol last week.

“I’m not surprised they scuttled it,” said Matthew Epstein, managing partner and founder of Newbold Partners, a fintech investment bank, of the Visa-Plaid merger. Regulators worry that big tech companies will buy new nascent vendors early in their lifecycles, Epstein said.

“The consensus in Washington is that the enforcement of antitrust rules is insufficient and that it poses problems,” Epstein said. “The change of administration is not going to change [the scrutiny]. Visa may have decided that this was a situation they couldn’t fight against City Hall. “

Write to Luisa Beltran at [email protected]