What does January’s FinTech SPAC Freeze tell us?

The Special Purpose Acquisition Company (SPAC) may not be dead, but its pulse is pretty weak.

January has cast a deep chill on public listings in the FinTech space and so far has been a complete freeze for SPACs, once the darlings of Wall Street.

As tracked by PYMNTS, and with data current through the middle of last week, we’re seeing only a couple of IPO announcements so far this year — and they’re all being done through “traditional” initial public offerings (IPOs), with not a single SPAC among them.

The entries? One here, one there, according to the vertical, but amid rocky trading in recent weeks, it’s no surprise that there’s been a muted parade of announcements.

The data shows that January’s pace is a steep drop from the previous month.

There are a number of factors that come into play here. The latest wave of economic data shows that retail spending continues to fall for the second consecutive month. And inflation remains high, although the pace has moderated somewhat. Last week, the major banks showed that the widespread expectation is that loans will sour in the months ahead. In other words, the key markets and innovation that FinTechs depend on – consumer appetite to spend, demand for loans and other digital innovations – are no sure bets.

Wall Street must seem like a forbidden place, at least for the moment. Consider that PYMNTS’ FinTech IPO index was halved last year – and almost all listings are trading below the offer price. When that happens, it becomes more difficult to return to the public, so to speak, and gain the confidence of investors to have follow-on listings. It will also become more difficult to use shares as currency for agreements.

Ennui is not just limited to the FinTech sector. The Wall Street Journal (WSJ) reported this week that SPACs are valuing companies at the lowest levels seen in three years — where the average announced SPAC merger value is around $200 million, up from $2 billion just two years ago .

The recent IPO announcements are much smaller deals, with low single-digit millions of dollars in planned offerings.

A few entries

There has even been evidence of some scaling back of listings. In a filing with the Securities and Exchange Commission (SEC) this month, Ultimax Digital, focused on gaming (and in-game purchases) and offering a non-fungible token (NFT) marketplace, said it had lowered its proposed deal size to $8 million, noted 1 .9 million shares when the previous issue had been 2.5 million shares. The company reported no revenue in its filings and for the year ended December 2021 lost more than $942,000, according to its latest S-1 amendment.

Separately, RVeloCITY, billed as a peer-to-peer (P2P) online RV rental platform, filed with the SEC last week to raise up to $10 million. As for its business model, the company said in the filing that it offers “a free peer-to-peer platform with no listing or hosting fees to people who want to rent out their RVs, whom we designate as ‘hosts’. There is a processing fee of 3 % paid by people who want to rent RVs, whom we refer to as “guests”. We do not charge any fees to hosts.” The company said that in the year ending December 2021, it recorded nearly $399,000 in sales and an operating loss of $3.5 million.

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