For FinTechs looking to go public, 2023 will not be the year of the SPAC stock listing.
If they opt to go public at all, that is.
As PYMNTS’ own data shows, the pace of SPAC deals slowed to the low single digits in most cases, most notably in payments, shopping and work-related verticals.
To get a sense of some of the pressures that have bedeviled the SPAC landscape, Circle’s recent abandonment of its SPAC plans proves illustrative.
As reported earlier this month, the digital currency firm’s plans to go public have been delayed. The issuer of the USD Coin (USDC) and Euro Coin (EUROC) and publicly traded special purpose acquisition company (SPAC) Concord Acquisition Corp mutually agreed to end their proposed business combination.
And while Circle has said that going public remains on the company’s roadmap, we noted that the current environment is one where the FinTech IPO stock Index has been marked by double digit declines in individual names, depending on where you look. All told, the group is off more than 50% year to date.
In another example of a pullback in FinTech SPACs, RXR on Monday (Dec. 19) announced a move to step away from its previous goal of merging with a PropTech firm and will return $345 million to shareholders who had waited for a deal to close.
SPACs, facing increased regulatory scrutiny, are 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 the investors.
There are still some indications of SPAC activity here and there. As PYMNTS reported, Unique Logistics International said just this week that it has signed a definitive agreement and plan of merger 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 make investors skittish. Overall funding for IPO has plummeted by 68% over 2021’s levels.
Going the Private Route
We’ve seen a number of FinTechs opt to go public. Last week, investment firm Thoma Bravo said it would buy business spend management firm Coupa Software for $8 billion. Additionally, EQT Private Equity bought B2B order-to-cash software provider Billtrust for $1.7 billion in an all-cash transaction.
The move to eschew being publicly traded, or being listed in the first place, keeps companies from having to satisfy the fickleness of investors through quarterly earnings reports. That’s where the “over/under” of meeting and exceeding analyst consensus on revenues or profitability timelines becomes onerous, and stocks hit turbulence.
By going private, there’s the chance to raise the capital needed to grow into new markets, too. Call it a bit of shelter from the storm, at least for now.