Looking Back On 2020: M&A, IPO's, PPP, & Payments
Hi all, Julie here.
Hope everyone is enjoying a nice Labor Day weekend before the Fall kicks off! I’m just relaxing in Brooklyn this weekend and trying to take it pretty easy. And since the Flyers lost last night, I’m also trying to make the fiance feel better about the NHL season being over.
Anyways, I’m going to keep this post semi-short just because even if you’d love to read a long newsletter over the holiday weekend, I want to encourage you to disconnect and take some time to spend with friends, family, pets, or just on a solo walk by yourself.
So, let’s just take a recap of what has happened so far this year in our world of fintech. Before I left Bloomberg in March, Intuit made an offer to buy Credit Karma and Visa made an offer to buy Plaid. Other M&A transactions this year that happened later on include AmEx and Kabbage, SoFi and Galileo and Enova International and OnDeck. There were others too but those are the ones that come to mind right away. Now, some of these had better outcomes than others. Credit Karma and Plaid both got great valuations (assuming the transactions go through), while the lenders Kabbage and OnDeck were crushed. It’s wild to me how fintech was SO tied to a lending space that was ‘changing the world,’ and now I have a hard time thinking of a transaction in that field that has performed well over the long term. Oh how the mighty have fallen.
Then there’s Robinhood, a company that we can’t seem to stop talking about for a variety of reasons. Love them or hate them, they’ve seen a ton of growth this year and VCs have been clamoring to get in (they’ve raised funding 3 times in 2020 now? Honestly can’t even keep track anymore). Anyways, since we were all just sitting at home without anything to do, we did what any good human being would do—we bought call options! No really, that’s what a lot of us apparently ended up doing, and Robinhood was the place to go. I was a part of the group that started wading into stocks, but I’ll steer clear of call options on Tesla after taking a class on options in college. My heart (and head) can’t handle all of that. I think the big question here is whether these customers stick around once they go back to work, and whether they continue to use Robinhood in the future when they might want a more sophisticated platform. As a friend of mine pointed out in last week’s newsletter, Robinhood’s incentives are at best misaligned with its users and at worst in opposition. That’s not typically a great long term business strategy.
Payments! Guess what else we’ve all been doing during COVID? Online shopping! PayPal, Stripe, Shopify, Square et al have had a monster year thanks to this trend. PayPal was around $80 a share when I left Bloomberg on March 3 and it’s near a staggering $200 a share now. Sadly, this was not one of the stocks I bought, I did buy Peloton though so I still feel ok about myself. Basically these players all saw about 5 years of growth in 5 months. Makes sense their stocks are a hell of a lot higher. And, while some of this spending will go back to in-store, a lot of it is here to stay.
IPOs. Somehow, we’ve had a few of these this year and they’ve done extremely well in many cases, at least for the first few weeks. Rocket Mortgage, Lemonade, Bill.com, BigCommerce and nCino. A pandemic seems like a weird time to go public, but those retail traders were anxious to get a piece of these newly minted public companies. However, investor appetite has waned in many cases. After skyrocketing to $96 a share, Lemonade is now trading back at $44. Given, that’s more than the $29 it went out at, but much like early stage VCs trying to get in on all these hot deals, traders were a bit too enthusiastic.
The last topic I want to remind us of is how many of the companies in our space stepped up to help small businesses that were suffering from the shutdown. Square, PayPal, Kabbage, Plaid, Alloy, Gusto and others played various roles in helping SMBs get loans, whether that be actually doling out the funds or just helping them fill out paperwork as quickly as possible before the funds dried up. This was a big moment for the fintech space, putting it on the same level as the incumbents. From my point of view, it has so far been a success for those involved.
Catch you guys next week! Looking forward to all that this Fall has in store.