SPACs: What’s next for FinTechs?

SPACs have had a lot of media attention in the last few months, but what are SPACs after all?

SPACs have had a lot of media attention in the last few months, but what are SPACs after all?

A SPAC, also known as a “blank check company”,  is a shell company with the sole purpose of raising capital through investments in an IPO to merge with an existing company. Private owned companies found that SPACs are a quicker (and most times better) way to go public than going for the whole IPO process.

SPACs are not something new, they have been around for decades, but in 2020 they experienced a boom. In data collected by SPACInsider, there were 248 SPAC IPOs in the US throughout 2020, compared to only 59 in 2019. Before that, the average number of SPACs a year would be around the 20 mark. 

In Europe, SPACs are still to catch on. In 2020,  only 8 Europe-based SPACs completed an IPO, with 3 of them having chosen to list on European stock exchanges, S&P Global Market Intelligence data shows.

In 2021, 4 European SPACs — Lakestar SPAC I SE, ESG Core Investments BV, ScION Tech Growth II and Centricus Acquisition Corp. — had made their stock market debut in February.

If SPACs do catch on in Europe, the wealthy Nordic countries have a good chance to become a SPCAs new heaven.

As reported on Bloomberg, “first SPAC in Europe’s rich north has bankers lining up for more”. The article explained that Swedish bank SEB was the sole global coordinator for the first SPAC to go public in Stockholm in March this year, announcing the deal by investment firm Bure AB.

Per Thurezon, the managing director of SEB’s corporate finance unit explained that SEB will  “try to expand irrespective of whether the new employees would work with SPACs or other things”.

What are the companies fueling the SPAC hype?

SPACs have existed in one form or another as early as the 1990s, usually as a faster way for smaller companies to go public.

However, the pandemic has compelled some businesses to choose quicker ways to raise money and go public, hence the SPACs boom.

There were 2 recent SPACs that made headlines and caused a lot of buzz around the world.

The first one is Nikola, a company planning to eventually offer electric or hydrogen-powered trucks. Nikola then merged with VectorIQ Acquisition. Then the SPAC changed its name to Nikola.

Then there was Virgin Galactic, Richard Branson’s SPACe tourism branch. It will offer sight-seeing trips into near orbit around the earth. It did a similar deal with Social Capital Hedosophia.

What do SPACs mean for FinTechs?

After the impact of the covid pandemic, FinTech focused SPAC groups are targeting FinTechs that provide digital banking solutions, with a focus on payments in banking, insurance, and investment management, data analytics, cryptocurrency custody or transacting, and general financial services. 

Earlier this year in the US, digital finance platform MoneyLion, cross-border payment solutions Payoneer and online finance start-up SoFi merged with their respective SPACs. 

MoneyLion’s CEO John James, talking about their SPAC deal, explained that the platform is “at the perfect high-growth inflection point that makes accessing public markets a logical next step. [… ] We believe in today's market, there are limited opportunities to invest in high-growth businesses built for profitability like MoneyLion”. 

Looking outside the US, the regions more likely for a FinTech focused SPAC merge will be Europe (Nordic and Scandinavian areas), Baltic countries, MENA (Middle East and North Africa), or Southeast Asia (countries south of China), according to FinTechTris.

What FinTechs do you think will go public this year via SPAC? Please comment and share below👇