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Why Plaid may hold off on the march to go public

Plaid has the luxury of determining its own growth path, and investors are likely to jump at the prospect of new funding rounds for Plaid as an independent company

Weeks after the mutual termination of the $5.3 billion PlaidVisa deal, speculation on social media is rife as to which vehicle the company will use to fuel its next growth phase. By that we mean whether or not it decides to go public, and if so, how.

The company continues to release new products – it rolled out a deposit switch offering this week – but many seem only interested in news which has yet to be announced: A Twitter post announcing the new offering was met with the reply “stop playing and do a direct listing please.” Plaid’s public Twitter messages contributed to the rumor mill as well, with a tweet last week proclaiming “it’s not over yet,” and that more news would be coming soon. 

In the aftermath of the dissolution of the Visa acquisition deal, reports emerged that the company could go public through a merger with a special purpose acquisition company (SPAC). Others said not so fast. They argued that Plaid, which this year saw hundreds of new banks and over 4,000 companies turn to Plaid for infrastructure to support their businesses, was primed for a new phase of growth as an independent entity. Plaid CEO Zach Perret echoed these sentiments, and confirmed that the company hadn’t spoken to any SPACs. 

Of course, that hasn’t put an end to the chatter about “big news” that’s supposedly yet to drop – egged on by a cryptic tweet from a known SPAC investor. FinLedger spoke with a couple of industry sources who offered their perspectives on what may be next for Plaid.

“The antitrust concerns [with the Visa deal] gave them a convenient out,” said David Sica, a partner at Nyca Partners. “’I’m not going to speculate on whether it will get ‘SPAC’d’ or if it will raise a round, but I think there’s definitely significant interest in the investor market to do a deal at a much higher price.”

He suggested that there is confidence in the company’s growth prospects as a stand-alone company.

“Any time a smaller company is acquired by such a large company, it’s really hard to realize that vision,” said Sica. 

Ryan Gilbert, a partner at Propel Venture Partners and CEO of FTAC Olympus Acquisition Corp., a SPAC that undertook a $750 million IPO last August, told FinLedger he doesn’t see a rush to go public in the cards for Plaid, whether through a SPAC or some other method. Appetite from investors for further funding rounds may generate enough momentum for further funding rounds as an independent company, he suggested.

“I think going public is a distraction,” he said. “You only start raising public capital when you think you’ve outgrown what private capital can bring you, and I don’t think that they’ve outgrown that. There are more than two fistfuls of very large funds – venture funds, private equity funds, hedge funds, et cetera – that will jump in.”

Gilbert noted that Plaid, being a leading infrastructure player like Marqeta and Stripe, has the luxury of determining its own growth path, and that it stands to become stronger as a private company. 

“I think there’s at least one more, or an investment cycle into the company and maybe two just before an IPO,” he said. “They’re going to have this huge investor demand for a company that is battle ready, that has experienced the ups and downs of a failed M&A, but has grown significantly over the past year.”

Indeed, the centrality of Plaid’s role as a financial services utility puts it in a sweet spot comparable to few others in the field. 

“Every single company I engage with as a venture investor works with Plaid – no exceptions – which is unbelievable,” he said.

Of course, the elevation of Plaid’s fortunes is also good news for others in the data aggregation market, given strong growth in digital financial services in recent months. MX, which recently raised $300 million in Series C funding, said it plans to go public, and it’s yet to be seen whether the current climate will revive rumors of Yodlee being spun off from Envestnet to take advantage of a rising valuation.

“Envestnet is a solid company, and Yodlee is a very important part of that, and I wonder what an independent Yodlee would look like in today’s market – they would probably get a far higher value than being part of Envestnet. So to all the SPAC guys out there, that’s a target,” said Gilbert. “The second thing is MX has raised a big round at a step-up valuation, and it just tells me these guys are moving very solidly.”

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