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Deep Dive into the MoneyLion and OppFi SPACs

Two more fintech companies announced last week they will be going public via SPACs

February 15, 2021 By Peter Renton Leave a Comment

The fintech SPAC craze continues with two big fintech names announcing deals last week. MoneyLion and OppLoans (they are rebranding to OppFi) are both going public via SPACs with the deals expected to close by the end of Q2.

I caught up with the CEOs of both companies today to get the back story on their SPAC deals. But before I get into those conversations a little primer on SPACs. SPAC stands for Special Purpose Acquisition Vehicle, these are public companies formed for the explicit purpose to acquire an existing company. They have been around for decades but have seen a resurgence in the last few months. We are keeping track of all the SPAC deals in fintech here.

MoneyLion Closes Deal With Fusion Acquisition Corp

Founded in 2013 MoneyLion began life as an online consumer lending platform. But CEO and founder Dee Choubey always saw that as just an entry point into offering a much broader suite of financial services. But even as a lender they had a different approach, offering a free PFM app to help their customers make better financial decisions. Back in 2016 (when I recorded this podcast interview with Dee) customers could connect bank or credit card accounts and receive insights into how to save money or build a better financial life.

That initial loan product has gone now as MoneyLion has morphed into a full-service financial app or as they call it the “All-in-one Mobile Banking Experince”. They offer mobile banking, instant cash advances, investment accounts, credit builder loans, debit rewards cards and more.

When I asked Dee why he decided to take the company public now he talked about the higher profile a public company has and the enhanced ability to raise capital. They would not have been able raise this much capital from the private markets so doing a SPAC deal was the most efficient way to go.

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SPACs Become the Go To Listing Vehicle for Fintech Companies

Once seen as a niche transaction, SPACs have gained considerable momentum in the last year as fintech companies eye public markets; here is a list of the significant SPAC deals to date

February 3, 2021 By Todd Anderson 3 Comments

One of the hottest trends on Wall Street has found its way to the fintech market. A SPAC or special purpose acquisition company is a vehicle for companies to go public without having to navigate the arduous and expensive IPO process.

SPACs are shell companies set up by investors with the sole purpose of raising money through an IPO to eventually acquire another company. SPACs have skyrocketed from a small number of deals in 2019 to more than 20 in 2020.

We’ve put together a list of fintech SPACs, current deals in market and completed transactions. Next week we’ll bring together Greg Smith of FT Partners and Brendan Carroll of Victory Park Capital to discuss this trend and what it means for fintech access to public markets.

Here is a list of the current SPACs in the market for a fintech acquisition:

Deep Lake Capital Acquisition – the company plans to target businesses in the financial technology, ecommerce software, and data and analytics sectors with enterprise values between $750M-$1.5B.
FinTech Acquisition V – the company plans to target businesses providing technological services to the financial services industry.
JOFF Fintech Acquisition – a blank check company targeting the financial services industry and Fintech.
Fusion Acquisition – is rumored to be in talks to acquire MoneyLion, a mobile banking, lending and investment platform.
Queen’s Gambit Growth Capital – plans to target businesses that provide solutions promoting sustainable development, economic growth, and prosperity, with sectors of potential interest including clean energy, healthcare, financial technology, industrials, mobility, and emerging technology.
Quantum FinTech Acquisition – targeting businesses providing tech services to the financial sector.
VPC Impact Acquisition Holdings – intends to merge with a high-growth business in the financial technology industry with an enterprise value of about $800 million to $2 billion.

Here is a list of announced or completed fintech SPAC transactions:

BankMobile & Megalith Financial – $140mn
Billtrust & South Mountain Merger Corp. – $1.3bn
Finance of America & Replay Acquisition Corp. – $1.9bn
Global Blue & Far Point – GB (NYSE) – $2.6bn
Katapult & FinServ Acquisition Corp. – $993mn
Opendoor & IPO 2.0 Social Capital Hedosophia Holdings II – OPEN (Nasdaq) – $4.8bn
OpenLending & Nebula Acquisition Corporation – LPRO (Nasdaq) – $1.7bn
Paya & FinTech Acquisition Corp. III – PAYA (Nasdaq) – $1.3bn
Paysafe & Foley Trasimene Acquisition Corp. II – PSFE (NYSE) – $9bn
Payoneer & FTAC Olympus Acquisition Corp. – $3.3bn
Porch & Proptech Acquisition – PRCH (Nasdaq) – $1.08bn
SoFi & Social Capital Hedosophia Corp V – $8.65bn
Sunlight Financial & Apollo-Affiliated Spartan Acquisition Corp. II – SPRQ (NYSE) – $1.3bn
United Wholesale Mortgage & Gores Holdings IV, Inv. – UWMC (Nasdaq) – $16.1bn

SPACs look to be here to stay, at least in the near term. What this craze will do, though, is create a new breed of public companies in fintech. That will raise the profile of our industry and will likely produce a handful of household names.

SoFi to Go Public via a SPAC That Values the Company at $8.65 Billion

The deal will provide up to $2.4 billion in cash for SoFi and is expected to close by the end of Q1

January 7, 2021 By Peter Renton 3 Comments

Big news from SoFi today. While we know that the company has been considering going public for some time, we learned today that they will do so, not via an IPO, but through a Special Purpose Acquisition Company (SPAC) deal. The publicly traded SPAC, Social Capital Hedosophia Holdings Corp. V (NYSE:IPOE) has agreed to merge with SoFi in a deal that values the fintech at $8.65 billion. The deal will provide up to $2.4 billion in cash proceeds and is expected to close in the first quarter.

Well known Silicon Valley venture capitalist, Chamath Palihapitiya, the founder of Social Capital, is the architect of this deal. Here is what he said in an interview on CNBC earlier today where he gave his rational:

What I did was systematically try to future out what was broken in banking, and try to figure out which company was the best representative of the solution people wanted. SoFi was the top of the list when I looked across all the companies.

So, from his perspective SoFi is best positioned to take advantage of the trends shaping banking today. CEO Anthony Noto said at LendIt Fintech USA last year that he wants SoFi to be a top 10 financial institution in the coming years and that was one of the driving forces behind their 20-year deal for the naming rights to SoFi Stadium. They have probably the broadest product set of any fintech company today so no doubt that was part of the appeal to Palihapitiya.

You should check out SoFi’s official investor presentation which details not just their financials but also shows how they view financial services and SoFi’s role in it. They talk about leveraging the financial services productivity loop where building trust with one product leads consumers to using multiple products. As of December 7, 2020, SoFi had 1.7 million members of which 398,000 were multi-product members. They plan to grow those numbers 75% and 95% respectively in 2021.

Now, adjusted EBITDA was negative in 2019 and 2020 but they are projecting that to shift to a small profit in 2021. Revenue was estimated to be $621 million in 2020, with the vast majority still coming from their lending operation. In fact, the lending operation still funds the rest of their activities with the other financial services offerings having a negative $133 million contribution margin in 2020. That is not supposed to turn positive until 2023.

One should not underestimate the importance of SoFi’s acquisition of Galileo last year because this gave SoFi a successful technology services business that is profitable. If you look at the numbers in the official filing, SoFi’s technology platform (which I presume is primarily Galileo) generated $53 million in contribution margin in 2020 on revenue of $103 million. That is a good business.

Here is the official statement from CEO Anthony Noto on this deal:

SoFi is on a mission to help people achieve financial independence to realize their ambitions. Our ecosystem of products, rewards, and membership benefits all work together to help our members get their money right. With the secular acceleration in digital-first financial services offerings, SoFi is the only company providing a comprehensive solution all in one app. The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us. We look forward to helping more people get their money right in the years to come.

SoFi will become a publicly traded company when the deal closes. We should point out that SoFi received preliminary approval from the OCC for a national bank charter in October. According to the press release $150 million of the transaction proceeds will be used to clean up the SoFi cap table that will be more conducive to obtaining the bank charter.

This is the first blockbuster fintech deal of the year. Beating them to the punch, though, will be Affirm, which is getting set to go public on Nasdaq in an IPO as soon as January 13. So, while last year was the year for fintech M&A this year is quickly shaping up to be the year that fintech hits the public markets in a big way. It is going to be an interesting ride.

The Lending Club IPO: A First Hand Account at the NYSE

December 11, 2014 By Peter Renton 34 Comments

Lending Club banners outside the New York Stock Exchange on IPO day

When I first started writing about this industry in 2010 I did it because I loved the concept and believed in its potential. Back then I was pretty much alone in that thinking.

But earlier today many thousands of investors around this country decided that they also believed in this industry’s potential as they bought equity in Lending Club in the first IPO this industry has ever seen. It was an historic and groundbreaking day.

When Lending Club sent me an email early last week inviting me to their IPO celebration today on the floor of the New York Stock Exchange I didn’t hesitate. I wanted to be there and was honored that they included me.

So, this morning I arrived at the NYSE at 8am. There were dozens of people milling about outside admiring the huge Lending Club banner including a who’s who of the P2P lending industry. All the invited guests, numbering probably 100 or so, then headed inside where we were all presented with a bright red Lending Club jacket. [Read more…]