SPACs Take Trading Apps Public in a Test of Lay-Investor Loyalty

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A pair of special purpose acquisition companies are taking trading apps public amid weakness in that corner of equity capital markets, testing the willingness of their app users to buy into their business models.

Acorns Grow Inc., which offers an app with investing and banking products, is the latest to throw its hat into the public markets’ ring, announcing a hookup with blank-check firm Pioneer Merger Corp. on Thursday that’s expected to close in the back half of the year.

That same day, shareholders approved the merger of Social Finance Inc., known for its SoFi app, with a SPAC founded by well-known venture capitalist Chamath Palihapitiya. These deals come ahead of their largest competitor Robinhood Inc.’s initial public offering, targeted for late June. Financial-technology firm Stash is also said to explore a market listing.

Apps like Acorns, SoFi, Robinhood and Stash have made it easy for the average investor to buy and sell stocks, and they’re on the runway to go public amid resumption of trading mania for the likes of GameStop Corp. and AMC Entertainment Holdings Inc., facilitated by their technology.

So far, based on the SPACs’ performance, the apps’ customers haven’t shown the same enthusiasm for their debuts as they have for their favorite meme stocks. Still, a show of support for these fintech-SPAC mergers could help revive the blank-check industry, which has suffered in recent months from lackluster post-deal performance and a regulatory clampdown. The De-SPAC Index, which measures the performance of a group of 25 companies that came from SPAC reverse mergers, is down more than 30% from its mid-February peak.

SPACs Take Trading Apps Public in a Test of Lay-Investor Loyalty

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“I don’t think their users are going to have loyalty whatsoever for the platform,” said Michael Batnick, director of research at Ritholtz Wealth Management. “If the stocks debut favorably -- cool. But if it’s a dud, retail investors are not going to prop it up. It’s just another ticker on a screen.” Barry Ritholtz, chairman and CIO of the firm, is a Bloomberg Opinion columnist.

San Francisco-based SoFi offers financial services including loan refinancing, mortgages, personal loans, credit cards and investing and deposit accounts. Shares are expected to list under the symbol “SOFI” on June 1. Irvine, Calif.-based Acorns operates a saving and investing app. It will debut under the symbol “OAKS” after its expected tie-up later this year. Fintech firms like these have disrupted the financial services industry, a business that Social Finance has called a $2 trillion opportunity.

“Acorns-Pioneer looks like a decent deal,” given it’s a relatively high-profile company with a large customer following, said Julian Klymochko, a manager of a SPAC-focused ETF at Calgary-based Accelerate Financial Technologies.

Acorns and SoFi have financial giants backing them, including funds and accounts managed by BlackRock, Baron Capital Group, Chamath Palihapitiya himself, as well as Wellington Management.

What appears to be missing is a market reaction equal to that institutional backing, according to Matthew Tuttle of Tuttle Capital Management, the firm behind SPAC exchange-traded funds and the recently debuted FOMO ETF.

“The SPAC market desperately needs a win, and if it is Chamath who brings it in, then so much the better,” he said.

©2021 Bloomberg L.P.

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