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S&P Global Market Intelligence: Fintech Heavyweights Still Opting for IPOs over SPACs

Victoria Sanseverino

Victoria Sanseverino

Dani Lipkin, Director of Global Business Development at client at TMXGroup comments on the current SPAC frenzy and the popularity of Fintech IPOs in Canada.

The SPAC frenzy has stolen the spotlight for many public market debuts in recent months, but the traditional IPO is still luring some of the highest-profile fintech companies.

Since January 2020, 18 fintech-related companies have conducted IPOs or direct listings in the U.S. and Canada, according to data compiled by S&P Global Market Intelligence, with another — Robinhood Markets Inc. — set to begin trading July 29. Among the still-private fintech firms eyeing the public market, the largest have outgrown the “sweet spot” for a blank-check deal, industry experts said, making an IPO their best option. While special purpose acquisition companies will continue attracting fintechs valued in the $1 billion to $10 billion range, the highest-profile names seeking much larger valuations are preparing for IPOs.

Retail trading app Robinhood is aiming for a $35 billion valuation, which would make it one of the largest fintech IPOs if its offering goes to plan. Other fintechs eyeing IPOs include neobank Chime Financial Inc., consumer finance firms Credit Sesame Inc. and NerdWallet Inc., and payments technology company Stripe Inc., which completed a funding round in March that valued it at $95 billion.

Some companies and their owners choose the SPAC route because it lets them negotiate a price before agreeing to the deal, giving them certainty around their valuation, said Don Duffy, president of strategic communications and advisory firm ICR. In a traditional IPO process, the company gets a range of valuations pitched by investment bankers, and the exact price is revealed by the market on the IPO’s launch date. But the negotiated price in a SPAC deal requires the blank-check firm to come up with the cash, which can be a challenge for the largest private targets. An IPO has no issues accommodating companies of any size.

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