Payoneer to Go Public via $3.3B Merger With SPAC

As the initial public offering (IPO) activity picks up in early 2021, payment start-up Payoneer plans reorganization by entering an agreement with FTAC Olympus Acquisition Corp. Let’s take a closer look at Payoneer’s plans for 2021 as it enters the IPO market.

On Wednesday, Payoneer Inc., a global payment enabling platform that delivers a suite of services, including cross-border payments and payment orchestration for global merchants, announcedOpens a new window that it had entered an agreement and reorganization plan with FTAC Olympus Acquisition Corp. (FTOC), a special purpose acquisition company. The New York-based fintech start-up is all set to become a publicly-traded company by merging with a blank-check company led by Betsy Z. Cohen, founder of Bancorp, Inc.

Cohen’s SPAC values Payoneer at $3.3 billion post the merger. This merger also includes a $300 million private investment in public equity (PIPE) with a band of already existing investors like Wellington Management, Fidelity Management & Research Company, and Franklin Templeton.

SPAC Trend on the Rise

The blank check companies, like that of FTAC Olympus Acquisition Corp., are generally formed with a motto of acquiring another company and taking it public typically within a span of two years. As the traditional IPO market was marred by extensive market volatility and the pandemic in 2020, SPAC offerings have emerged as hot trends since then.

2020 witnessed the doubling of IPOs in comparison to 2019. There were about 494 debuts in the IPO market, which raised about $174 billion. According to FactSet, these figures are quite staggering as the rejuvenated IPO market represented a 150% increase in dollars over 2019. SPAC IPOs surged in 2020, thereby representing 56% of all IPOs in Q3 and 52% of all IPOs in Q4.

SPAC IPOs Surged in 2020
Source: FactSetOpens a new window

Although the SPAC trend picked up in 2020, Betsy Z. Cohen, chairman of the board of directors of FTAC Olympus Acquisition Corp., and her team were on track before the 2020s. A 2018 SPAC firm had a merger agreement late last year with payments provider Paya. Another fintech acquisition went public in February 2015 combined with CardConnect, which First Data later acquired for about $750 million.

Why Did Payoneer Choose to Go Public With a SPAC?

Yuval Tal, an Israeli entrepreneur, started Payoneer back in 2005. Today, the company works in over 200 nations and territories. It is currently headed by CEO Scott Galit, who joined Payoneer in 2010 after years of experience at First Data and MasterCard.

Payoneer confirmed that it chose to go public via SPAC as it would provide the company the certainty of financing with more control around timing. This move has also given the company a stable platform for future growth, keeping in mind the current IPO market trend. The move was further fueled by FTOC’s recognized position in the market as a SPAC pioneer. That being said, in hindsight, Payoneer expects a long-term partnership with FTOC.

“Technology is transforming commerce globally, bringing down borders and making it possible for entrepreneurs from all over the world to build a digital business,” saidOpens a new window Scott Galit.  “This new way of doing business requires a global financial platform built for the digital age… We are thrilled to partner with Betsy Cohen and the FTOC team and are confident that we will benefit from their significant industry expertise as we embark on our journey as a public company.”

On the other hand, Cohen was equally excited about the partnership with Payoneer. She saidOpens a new window , “Payoneer is at the forefront of the rapid, global shift to digital commerce across all sectors. Its proven ability to facilitate the overall growth of ecommerce through capabilities such as B2B payment digitization, global risk and compliance infrastructure, and the enablement for SMBs to rapidly grow and scale sets Payoneer apart. I couldn’t be more excited about this transaction, which will allow this talented team to accelerate their growth strategy and continue to democratize access to global commerce.”

Payoneer’s Plans of Reorganization With FTOC

Payoneer’s reorganization plans disclose an implied enterprise value of approximately $3.3 billion, following which the company is expected to have up to $563 million in cash, offering significant capital flexibility for continued future organic and inorganic growth.

Besides, the existing Payoneer equity holders have the potential to receive compensation for additional shares of common stock if certain stock price targets are met as agreed upon in the reorganization agreement. If this works out, then the current equity holders will remain the largest investors by rolling over significant equity into the company.

These reorganization plans have been approved by the boards of both parties, Payoneer and FTOC. According to Payoneer, the transaction is expected to close during the first half of 2021, subject to approval by FTOC’s stockholders. Further to this, the effectiveness of a registration statement is to be filed with the Securities and Exchange Commission (SEC) in connection with the transaction on completion of any required regulatory procedures.

In conclusion

Despite the pandemic, Payoneer processed $44 billion-plus payments in 2020 and expects to earn $432 million in revenue in 2021. Having said that, as we march into 2021, more private companies, including Payoneer, have opted for innovative ways to bring their shares to public markets. It will be interesting to watch how Payoneer performs with this growing trend as it merges with Cohen’s SPAC.

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