PYMNTS-MonitorEdge-May-2024

SPAC CEO: Blank Check Listings Help FinTechs with Growth ‘Inflection Point’

The continued, heady pace of “blank-check” firms filing to go public shows no sign of abating. And while some observers may point to what seems an unsustainable pace (and soaring initial public offering prices), others note that listing via special purpose acquisition companies (SPAC) has strategic value for the companies that typically are targets in the process.

Amanda Abrams, CEO of FinTech Masala, CEO of FTAC Acquisition Corp. and managing director at Cohen and Co., which has launched several SPACs, told PYMNTS that SPACs could help fast-growing, smaller firms get the capital they need to thrive. She said that there have been, and still are, a number of FinTechs started in the last several years — some of them stretching back to the early 2000s — that are growing quickly and are at what she termed “an inflection point” where an infusion of capital could take them to the next level in their life cycles.

But, she added, these same firms may not be able, typically, to access the public markets at the valuations they would desire because valuations tied to traditional IPO conduits might be tied to historical numbers.

By way of contrast, SPAC valuations tend to focus on forward-looking projections. In addition, the SPAC process is relatively accelerated, where these fast-growing firms can gain access to capital more quickly – a virtuous cycle that helps bring innovations to end users.

For FinTechs that are eying exit strategies down the line, she added, going public via SPAC gives them validation and an eventual “exit” that may represent offers that are significant premiums to bids garnered even a year or two ago.

Cohen, she noted, has done a number of acquisitions focused on payments or payments-related firms through SPACs dating back to 2015 (through SPACs such as FTAC Athena Acquisition, FTC Hera Acquisition and others).

Asked what attributes are tied to attractive acquisition candidates, she said that “a great business model with a great management team that has the ability to execute on a plan is what we’re looking at — more than a specific space within the FinTech area.” Cohen, she added, finds double-digit top-line growth, recurring revenues with a sticky customer base of value in the business model. Funds raised through the SPAC channel, she said, can also give these high-growth firms “access to a ‘public currency where they can execute bolt-on acquisitions that will really fuel growth” to accelerate their business models.

Looking at the SPAC space in general, Abrams pointed to the boom in listings over the past several months. As a result, there have been more “target companies” that are actively seeking deals with SPACS.

“These are companies that may not have even been aware of this alternative or had considered it in the same light” previous to when SPACS had the visibility they do now.

There will be an eventual pullback at some point when the market experiences some level of saturation and when SPACs find they can’t find desirable targets or face doing transactions at valuations that are less than ideal.

“But I don’t think that’s going to be the end of SPACs,” she said, stating that “I don’t think it’s a fad or trend. SPACs have a real place in the market. They offer an alternative to accessing the public markets and it’s an alternative to an IPO or a direct listing.”

Heady Pace Of Listings Continues 

The PYMNTS SPAC/IPO Tracker finds that through the third week of March, banking/financial services-related and commerce-related announcements held sway. As evidenced in the chart below, through the month (which has not ended yet), financial services announcements totaled about half a dozen.

Among those announcements, Fintech SPAC Newcourt Acquisition filed for a $200 million IPO to focus on FinTechs with emerging markets exposure. Elsewhere, 1Sharpe Acquisition, a blank check company formed by 1Sharpe Capital targeting, will target PropTech and FinTech businesses. The company filed earlier this month to raise $225 million in an initial public offering.

And in the InsurTech space, real estate tech startup Doma, which had been formerly known as States Title, has announced it will go public through a merger with SPAC Capitol Investment Corp. V in a deal valued at $3 billion, including debt, as reported by TechCrunch.

And though there’s not yet an official announcement, as relayed here last week, Chime is holding early talks with investment banks on a new stock market flotation, which could value the startup at over $30 billion.

PYMNTS-MonitorEdge-May-2024