By: Gerelyn Terzo
Activist hedge funds have fintech companies on their radar now that the space is making waves. Even though the summer is winding down, legacy banks are feeling the heat as the pipeline for fintech M&A and IPOs continues to grow. Coinbase is going across the pond on crypto. Google Pay is suffering some defections, Austin is a hotbed for tech talent and remote work is all the rage. Let’s dive in.
Capital Markets Activity
San Francisco-based activist hedge fund ValueAct Capital has set its sights on payments company Fiserv. The investment firm now owns 6.2 million shares of the fintech play after tacking on another 5.3 million shares in Q2, as per a regulatory filing. With the added shares, ValueAct bolstered its position in Fiserv by 600% vs. Q1 levels. The hedge fund’s combined stake in Fiserv is now worth $1.2 billion and it reportedly believes that the fintech’s credit card processing arm, Clover, should be worth $185 billion in the next few years.
Separately, Fiserv has teamed up with PayPal to support gig-economy workers. As a result of their new partnership, independent contractors will have the option to get paid via direct deposit in a PayPal or Venmo digital wallet. While traditionally, people have their paychecks deposited into financial institutions, the pendulum has begun to swing to non-interest-bearing accounts.
A buy now pay later (BNPL) IPO could be on the horizon. Sweden-based Klarna, which has been speculated as a takeover candidate since Square’s acquisition of Affirm, is on the offensive. The startup could reportedly be eyeing a public listing as soon as next year. Karna chief Sebastian Siemiatkowski told Bloomberg that while a deal is not imminent, the company is exploring a possible IPO to stick it to legacy banks. Klarna recently expanded its footprint into Poland and inked a deal with retailer H&M as its maiden partner in the country.
Deals a Plenty
London-based payments company Paysafe is scooping up Berlin, Germany-based viafintech, which considers itself an “alternative to the traditional banking structure,” in an all-cash deal. Viafintech is known for the brands Barzahlen/viacash and viacash and is behind what is known as a “mobile ATM” model, which gives users the ability to make cash withdrawals at retail locations using a barcode. Paysafe, which trades on the NYSE, is looking to expand its footprint in Germany, and the deal gives it an opportunity to generate banking from the target’s alternative banking solutions.
Brex has purchased Israeli-based fellow startup Weav, which is behind a “universal API” for e-commerce businesses. The deal, which has a price tag of $50 million, is Brex’s first major deal, and the acquisition is part of an international expansion push. Brex’s dashboard streamlines access to “credit cards, business cash accounts, spend management and bill pay software” for clients. Brex was an early mover to adopt a remote workforce approach even after the vaccinations were being distributed. Now the company has taken it to another level by reportedly adopting a fully remote model with no formal headquarters, taking a page out of the book of Coinbase. Brex was previously based in San Francisco and the shift should shave off millions of dollars in expenses.
PayPal has expanded its cryptocurrency support across the pond. Now U.K.-based users can buy, sell and hold bitcoin as well as other digital assets on the payments platform. PayPal first introduced crypto transactions to the U.S., and the latest offering represents its first international expansion of the service. PayPal boasts more than 400 million accounts worldwide, and its support of bitcoin has the potential to hasten mainstream adoption of the asset class.
Cryptocurrency exchange Coinbase can’t get enough crypto. CEO Brian Armstrong announced plans to buy more than $500 million in cryptocurrency assets for Coinbase’s balance sheet on top of its existing portfolio. In addition, they will invest 10% of future profits in cryptocurrencies, which Armstrong expects will increase over time as the market moves into its next phase of growth.
Meanwhile, despite the recent regulatory crackdown on crypto, investment firms are lining up to launch the industry’s first bitcoin ETF. Most recently, Galaxy Digital, which was founded by former hedge fund manager Mike Novogratz, has filed the necessary paperwork with the U.S. SEC for its version of a bitcoin ETF. Galaxy Digital joins the likes of similarly recent filers VanEck, Invesco and others. Bitcoin has been around for more than a decade and so far, market leaders have failed to convince regulators of the value of a bitcoin ETF.
Google alum Caesar Sengupta, who left the tech giant in the spring, has returned to the scene with his own fintech startup. Sengupta has started Arbo Works alongside a trio of former Google colleagues — David Shapiro, Felix Lin, and Zelidrag Hornung. Sengupta was employed by Google for a decade and a half and prior to that was with Standard Chartered Bank. While at Google, he was part of the team that introduced Google Pay, which now boasts more than 150 million MAUs in more than two dozen nations. In fact, the Google Pay team has suffered several defections of late amid what Business Insider describes as a “slow pace of progress.”
Challenger bank Revolut has unveiled a new feature called Payday, which gives U.K. employees the opportunity to gain access to a cut of their salaries sooner than later. For employees to be eligible, employers must first partner with Revolut for the feature, which is accessible via the app. Revolut is eyeing the U.S. market for an expansion. Employees can access up to half of their pay on demand for a fee. The feature is designed for people living from paycheck to paycheck on the heels of a difficult year.
Austin, Texas may be weird, but tech talent is increasingly attracted to the city. Most recently, Green Dot, which is behind a banking as a service platform, is relocating its headquarters from California to Austin. The company cites the city’s “location” and “tech talent pool” as the reasons behind its move.
On the Street
Goldman Sachs previously announced plans to pay its junior bankers higher salaries to retain talent. Now the Wall Street firm has revealed that the pay increases will also apply to junior members of its asset and wealth management division. The salaries will now start at $110K instead of a former $85K, while second-year professionals will get $125K for front-office positions.