Platforms Were Payments’ Hot 2021 IPO Theme — Will Profits Follow?

In the look back through the year that was, it might be too farfetched to say that SPACs and IPOs sizzled in the payments space.

But things certainly — well —  percolated.

And in the look back through the 12 months that brought us into yet another year of the great digital shift, some themes solidified:

Payments platforms caught the eyes of public investors, to be sure, as the private sector brought new issues to Wall Street and to markets around the globe.  And drilling a bit deeper, the banking and the work-related verticals led the pack, at a respective 71 and 61 listings.

But in a market environment that had seen its share of buoyancy — where the tech-heavy NASDAQ, for example, surged 26% on the year — it is not the case that a blanket rising tide lifted every firm.

The anecdotes abound, of course, of busted IPOs — the shares that trade below their offering prices — and of flat returns.  Grab, for example, the super app that listed in December at a bit more than $13, ended the year at a bit more than $7. Robinhood, the platform that has sought to expand retail investing’s allure, particularly among the younger demographics, went public in July, initially selling shares for $38, and ended the year at just under $18. Crypto platform Coinbase went public in April, with an initial “reference” price of $250, surged north of $320, and most recently was quoted at the end of the year at $252.

Then there are the firms like Global-e Online Ltd that have enjoyed heady returns, up more than 150% to $63, from $25 at its initial listing.  The company’s platform helps client firms tackle cross border direct to consumer commerce.

Operating Results Matter

You get the picture, and a point-by-point listing of these firms and how they perform might seem a bit like constructing a scattergram.  But overall, the typical hallmarks of investing might (reasonably) apply in a world that continues to be rocked by viruses and variants.  Technology is only part of the picture here.  Platforms that bring buyers and sellers together — or senders and receivers, or connect a range of activities together under a single digital umbrella — may elicit interest on the Street. But investors also, by and large, like to see profits in hand.  Black ink on the operating line may prove elusive, at least for a while, for companies that seek to be disruptors such as Robinhood (to give just one name).  And the specter of regulation can spur volatile sentiment for names such as Coinbase.

We note that firms operating on the international stage — and so-called blank check companies targeting deals that in turn promote new technologies in emerging and other markets — continue to draw headlines.

In examples through just the past week,  SHUAA Partners Acquisition I, with focus in the Middle East, North Africa, and Turkey, filed for a listing of up to $200 million.  In its SEC filing, the company said that “Key sectors within the tech space that have seen the highest share of regional deal flow include eCommerce (12%), the technology space (12%), healthtech (5%), delivery and logistics (5%) and foodtech (5%).”

The filing goes on to state that “these are the key growth and funding areas…benefiting from the tailwinds of the COVID-19 pandemic and the need for increased digitization. These key sectors do not factor in the wave of digital transformation of traditional sectors and businesses, which has created the need for regional solutions for cloud communications, big data, gaming, learning, and digital workspaces.”

Separately, Ledger Acquisition, a SPAC that filed this past week for a $150 million IPO, said it would look for acquisitions in the FinTech and blockchain spaces.

“Many blockchain companies have matured over the past decade alongside the industry. For example, there are companies that design and manufacture chips and host hardware to secure blockchain. Others facilitate the trading of digital assets and provide accessible software to create, store, and use digital assets. In the private market, the blockchain industry has been one of the most attractive sectors for investment in recent years,” Ledger said in the filing.

They say in investing that past performance does not guarantee future results … but we’ll wager that platforms, payments and blockchain will continue to draw SPAC and traditional listing activity alike.