The plaid is likely to go public after the failure to sell Visa

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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 off.

Instead, fintech is more likely to be made public through a traditional public offering, a special-purpose acquisition vehicle, or a direct listing, according to five fintech bankers and venture capitalists. De Barron.

“Plaid is likely to do an IPO or get SPAC,” said a venture capitalist.

“It’s the SPAC city,” another banker added.

A Plaid spokeswoman declined to comment.

SPACs have become the busiest sector of the stock market. There were 248 so-called blank check companies that went public in 2020, more than half of this year’s total IPOs, and grossed $ 82.3 billion, Dealogic said. The $ 82.3 billion is almost 50% of the $ 167.4 billion raised by the entire IPO market by 2020.

Blank verification companies have been aggressive with fintechs. Earlier this month,

Hedosophy of social capital

(ticker: IPOE), the latest blank check company of venture capitalist Chamath Palihapitiya, agreed to merge with online personal finance company Social Finance, or SoFi, in a $ 8.6 billion deal.

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, merges with Gores Holdings IV (GHIV), the Gores Group’s blank check company, in a $ 16.1 billion transaction. United Wholesale is expected to be listed 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’s fintech technology has raised $ 310 million in funding. That includes an initial round of $ 2.8 million as of 2013 and a round of $ 12.5 million in 2014, Crunchbase said. Both Visa (V) and

Mastercard

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

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

A Plaid spokeswoman said her investors “are committed to supporting Plaid’s path as an independent company and to our long-term growth trajectory.”

Visa agreed in January 2020 to buy Plaid for $ 5.3 billion. The deal, which did not include any break-up fees, would have been Visa’s biggest. The companies agreed on Tuesday in order to close the $ 5.3 billion transaction after the Justice Department demanded the blocking of the deal. The DOJ alleged that the acquisition would allow Visa to eliminate a competitive threat to its online debit business before Plaid had 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 it was confident it would have won the litigation. But the pace of a multi-year regulatory review “was not compatible with the rapidly moving realities in a startup, and delaying the closure by a year or more is not in the best interests of our customers, the financial system or consumers themselves.” , said Zach. Perret, co-founder and CEO of Plaid, in a blog post.

Plaid’s customer base has grown 60% in the last year as more people have gone digital, a spokeswoman said. The Covid-19 pandemic has caused many consumers to stop wanting to use cash or physically enter bank branches. Plaid focuses on “building out [its] products and continue to accommodate the generous growth potential that exists for Plaid as digital financing becomes more widespread, ”the spokeswoman said.

Justice Department lawsuit against Visa is the latest sign that regulators are concerned about the power of Silicon Valley giants

Facebook

(FB),

Microsoft

(MSFT) i

Alphabet

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

“I’m not surprised they’ve eliminated it,” said Matthew Epstein, managing partner and founder of Newbold Partners, a boutique investment bank focused on fintech technology, of the Visa-Plaid merger. Regulators are concerned that large technology companies will buy new start-up vendors at the beginning of their life cycle, Epstein said.

“The consensus in Washington is that there has been insufficient enforcement of antitrust rules and that this is causing problems,” Epstein said. “The change in administrations will not change [the scrutiny]. It is possible that Visa has decided that this is a situation in which they cannot fight against the City Council ”.

Write to Luisa Beltran to [email protected]