Is January’s FinTech SPAC Freeze Telling Us Something?
The special purpose acquisition company (SPAC) may not be dead, but its pulse is pretty faint.
January has thrown a deep chill for public listings in the FinTech space and has so far been a complete freeze-out for SPACs, which were once the darlings of Wall Street.
As tracked by PYMNTS, and with data current through the middle of this past week, we see only a couple of listings announcements year to date — and they are all being done through “traditional” initial public offerings (IPOs), with not a single SPAC among them.
The listings? One here, one there, according to the vertical, but amid the rocky trading of the last few weeks, it’s no surprise that there’s been a muted parade of announcements.
The data shows that January’s pace is a steep fall from even the month before.
There are any number of factors at work here. The latest spate of economic data shows that retail spending remains on the decline for the second straight month. And inflation remains high, even if its pace has been a bit muted. Last week, the big banks showed that the widespread anticipation is that loans will sour in the months ahead. In other words, the key markets and innovation upon which the FinTechs rely — consumers’ appetite to spend, demand for loans and other digital innovations — are no sure bet.
Wall Street must seem like a forbidding place, at least for the moment. Consider that PYMNTS’ FinTech IPO Index was cut in half last year — and pretty much all of the listings trade below their offer price. When that happens, it becomes harder to go back to the public well, so to speak, and gain investors’ confidence to have follow-on listings. It also becomes harder to use stock as currency to deals.
The ennui is not just limited to the FinTech sector. The Wall Street Journal (WSJ) reported this week that SPACs are valuing companies at the lowest levels seen in three years — where the average announced SPAC merger value stands at about $200 million, and that level had been $2 billion just two years ago.
The recent IPO announcements are much smaller deals, at low-single digit millions of dollars in planned offerings.
A Few Listings
There’s even been evidence of some scaling back of listings. In a filing with the Securities and Exchange Commission (SEC) this month, Ultimax Digital, focused on gaming (and in-game purchases) and offering a non-fungible token (NFT) marketplace, said it had lowered the proposed deal size to $8 million, listing 1.9 million shares when the previous offering had been 2.5 million shares. The company listed no revenues in its filings, and for the year ended in December 2021 lost more than $942,000, per the latest S-1 amendment.
Separately, RVeloCITY, billed as a peer-to-peer (P2P) online platform for RV rentals, registered with the SEC last week to raise up to $10 million. In terms of the business model, the company said in the filing that it offers “a free peer-to-peer platform with no listing or hosting fees to people who want to rent out their RVs, who we designate as ‘Hosts.’ There is a 3% processing fee paid by people who want to rent RVs, who we designate as ‘Guests.’ We do not charge any fees to Hosts.” The company said that in the year ended December 2021, it logged nearly $399,000 in sales and an operating loss of $3.5 million.