It has been a little over a year since Visa announced plans to acquire Plaid for $ 5.3 billion. Visa saw the fintech‘s in addition to its existing product line. He also liked how widely Plaid is used and how the company bridges the gap between financial institutions and financial application services.
However, those plans were halted in November when the Justice Department sued Visa to block the deal, citing antitrust concerns. Visa and Plaid canceled the acquisition in January, citing how long it would take to fight the lawsuit.
And just like that, Plaid found himself where he was before last year – all on his own, and considering his options.
I find this company intriguing, and the fallout from its deal with Visa makes me wonder: Could Plaid be the next big fintech to go public in 2021?
Connect financial applications and banks
Plaid provides technology that allows customers to connect their bank accounts to apps. When you sign up for Venmo, Square, or Chime, for example, you can connect the app to your bank account just by logging in. The company has effectively created a bridge between consumer financial applications and more than 11,000 banking institutions, making these applications easier to use than ever.
The company earns money on the fees it charges applications that use its service. So if you connect your Square account to your bank account and transfer money, Square pays a fee to Plaid to facilitate the transaction.
What I find most intriguing about Plaid is the sheer number of its partners and the fact that many of them are huge names in fintech. It works with Robinhood, Square, Coinbase, Live Oak Bancshares, and Carvana, Just to name a few. These partnerships place Plaid in a privileged position for growth. As many of these big names go public and continue to grow, Plaid is expected to grow alongside them. In fact, Plaid’s last round of funding rated it three times higher than its rating just a year ago.
Caught in regulatory crosswinds
In January 2020, Visa and Plaid reached a deal valued at $ 5.3 billion. However, the US Department of Justice has Visa more and more scrutinized, claiming that its practices violate antitrust laws. The Justice Department alleged that Visa would block competition by acquiring Plaid, which the Department said was creating its own payments network that competed with Visa.
Visa and Plaid mutually agreed to drop the deal in January. For Plaid, that meant another fundraiser. Sources said recently Barron that Plaid was about to complete a fundraiser in the amount of $ 500-600 million. That would value the company at close to $ 10 billion to $ 15 billion.
The chances of a public offering in the near future are lower
With this funding soon secured, it seems less likely that Plaid will be made public in the near future. Some believed he was exploring a plan to go public via PSPC in January, but those rumors have cooled. A source said Barron that the company would not sell to a SAVS, and that “with $ 600 million, [Plaid] can be independent for a long time. “
The company doesn’t let the blocked acquisition deal deter it. In fact, the pandemic has done wonders for fintech as consumers increased their use of financial apps. John Pitts, policy manager at Plaid, said that “the number of consumer adoptions of fintech that we have seen during the pandemic is considerably higher than anything we have seen in the past five years. ‘previous existence’.
The company is optimistic about its future. Last May, he launched Plaid Exchange, a product that aims to help small financial institutions keep pace with the big players, in part by moving them away from models of credential sharing, thereby increasing privacy and privacy. transparency for consumers.
Not much is known about Plaid’s finances. Forbes reported that according to some estimates, the company’s revenue in 2019 was around $ 100-200 million. Considering the growing use of financial apps during the pandemic and the subsequent expansion of Plaid’s valuation, it’s safe to say that its sales are now much higher. While Plaid may not have plans to go public soon, I will be watching it closely.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.