- Plaid has been a rumored SPAC target that got Redditors quite excited.
- The company used to have a deal with Visa, but the DoJ shut it down.
- This SPAC has exceptional strong ties to the fintech.
- But aside from that, it's a pretty good value to begin with.
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Portage Fintech Acquisition Corp. (NASDAQ:PFTA) is a freshly IPO'ed SPAC that raised $240 million. The SPAC team is headed by Adam Felesky who's also CEO at fintech investment specialist Portage Ventures ($1 billion in AUM). To source deals the SPAC leverages Portage Ventures' network and capabilities as well as that of Sagard Holdings. Sagard being headed by board member Paul Desmarais. Ajay Chowdhery is CFO and used to work in the M&A department at Visa (V) until April 2021. Famously late '20 Visa's deal with Plaid got shut down by the DoJ because it was considered a killer acquisition (deal to shut down an emerging competitor). Board member Jason Pate is actually the Head of Business Development at Plaid and leads the sale to Visa. Plaid creates software that helps financial services companies to connect apps to their customer data sources. Given this SPAC focuses on fintechs, it is a very interesting team. I'd estimate there's an above-average chance this team will bring a fintech the market will get excited about. Given its relationships on the capital markets, I expect this SPAC could hit above its paygrade in terms of potential PIPE-size. Finally, because it has Canadian roots perhaps it can source some deals that are slightly less competitive compared to the usual East or West Coast-based teams.
The SPAC formulated a number of loose criteria it is going by:
- Large addressable market
- Growth business
- A competitive position that can be defended
- Strong unit economics
- Differentiated technology
- Strong management team
A number of these is quite common but I like how the team phrased #3 which suggests they're thinking in terms of moats. Moats don't matter too much if you want to score quickly. A moat is extremely important if you want strong returns over the long term.
I also liked how the team is thinking about sourcing a deal with differentiated technology. Personally, I'm not sure when I review all these fintech whether they really have some special sauce or are merely really good at marketing. Their specialist background could really make a difference in separating the wheat from the chaff and bringing businesses to the market that are interesting for the long term.
At $9.98 per share the units (only security available on this name for now) are trading below the average for its category (including 1/3rd warrant). If I look at all the units including 1/3rd warrant, of SPACs looking for deals, there are 39 SPACs that are cheaper and 78 SPACs that are more expensive. The cheapest one goes for $9.89. The $0.09 cent difference seems immaterial but it is actually a major gap. The median price on a warrant on a SPAC looking for a target is currently only ~$1.
However, the warrant included can be redeemed at $10 which takes away some of its value. Purely going by the data this is an ok buy but not a slam by any means. Taking into account the ties to Plaid, the focus on fintech and the fairly impressive team lifts it to a level where I'm seriously tempted. I'll pass it up for now. Both time passing, other positions maturing and the units trading down could entice me to pick it up at some point.
Check out the Special Situation Investing report if you are interested in uncorrelated returns. We look at special situations like spin-offs, share repurchases, rights offerings and M&A events like Celgene. Ideas like this are especially interesting in the current late stages of the economic cycle.
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