Public listings through reverse mergers with special purpose acquisition companies (SPACs), commonly referred to as “backdoor listings,” have returned to the capital markets spotlight and are being utilized at record-breaking levels as an expedited alternative to traditional initial public offerings (IPOs). Often referred to as “blank check companies,” SPACs are publicly traded shell corporations that raise capital through an IPO of the SPAC (a SPAC IPO) in order to subsequently acquire and take public a separate privately held target company in what is commonly referred to as either a SPAC merger, a “De-SPAC” transaction or an initial business combination transaction (a SPAC IBC). The volume of SPAC IPOs and related SPAC IBCs (collectively, SPAC transactions) skyrocketed in 2020 as a result of COVID-19 pandemic-related financial market uncertainty, as well as sponsor, investor and target company appetite for liquidity and exit opportunities. Technology is considered to be the dominant sector for SPAC transactions, and an increasing number of SPACs are being formed to combine specifically with target companies in the financial services technology (Fintech) sector. This article provides a brief overview of the rise of SPAC transactions in the Fintech sector in 2020.
SPAC IPOS TARGETING FINTECH COMPANIES
The SPAC Sponsor View
Fintech-focused SPAC sponsors view the Fintech sector as ripe for SPAC business combinations as a result of the “deep supply” of privately held Fintech targets that are well positioned to be taken public, as well as the increased demand for Fintech-related products and services that has resulted from the COVID-19 pandemic. Recognition of the Fintech sector’s potential from a public market standpoint resulted in the launch of over 30 Fintech-focused SPAC IPOs in 2020, with the majority initiated during the second half of the year. Among the largest Fintech-focused SPAC IPOs of 2020 were Foley Trasimene Acquisition Corp. II’s $1.4 billion IPO, FTAC Olympus Acquisition Corp.’s $750 million IPO, Dragoneer Growth Opportunities Corp.’s $690 million IPO, and Far Peak Acquisition Corporation’s $550 million IPO. Other 2020 Fintech-related SPAC IPOs of note include SVF Investment Corp.’s planned $525 million IPO, FinTech Acquisition Corp. V’s $250 million IPO, and Dutch Star Companies Two B.V.’s €110 million IPO.
The Fintech Target Company View
From the Fintech target company’s perspective, going public via a SPAC business combination offers a number of advantages over a traditional IPO, including a faster listing process thanks to the avoidance of lengthy roadshows with prospective investors; certainty over valuation thanks to the target company’s ability to predetermine its valuation in direct negotiation with the SPAC sponsor prior to listing; contractual flexibility thanks to the ability of the target company to directly negotiate SPAC merger agreement terms with the SPAC sponsor; and an opportunity to enter the public markets in partnership with a SPAC management team that is composed of seasoned Fintech investors and well-known financial services industry professionals who can enhance the target company’s value and overall business prospects. Examples of prominent financial services industry professionals who form part of recently launched Fintech SPAC management teams include Douglas L. Braunstein, former CFO of JPMorgan Chase, who currently serves as President and Chairman of the Board of Hudson Executive Investment Corp.; Betsy Z. Cohen, former CEO of The Bancorp, Inc., who currently serves as Chairman of the Board of Fintech Acquisition Corps. IV and V; Robert E. Diamond Jr., former CEO of Barclays, who currently serves as Chairman of the Board of Concord Acquisition Corp.; and Xavier Rolet, former CEO of the London Stock Exchange, who currently serves as a Director of Golden Falcon Acquisition Corp. For these reasons, SPAC transactions are an appealing proposition to Fintech companies looking to go public in a challenging market environment.
Distinguishing Characteristics of Fintech SPACs
Fintech-focused SPACs come in a variety of shapes and sizes, with some focused on acquiring target companies active in specific Fintech product or geographic markets, while others focus on targets whose enterprise value falls within a specified range. Motive Capital Corp., for example, is focused on Fintech targets active in the “Banking & Payments, Capital Markets, Data & Analytics, Insurance and Investment Management” Fintech subsectors, while others, such as North Mountain Merger Corp., take a more wide-ranging approach that includes target companies in the “financial technology segment of the broader financial services industry.” Other Fintech SPACs, such as Far Peak Acquisition Corporation and Ribbit LEAP, Ltd., include crypto-assets and cryptocurrency-related services within the scope of their Fintech target company search, while others do not.
From a geographic standpoint, some Fintech SPACs will consider targets located in multiple continents, while others focus more narrowly on a particular region. Golden Falcon Acquisition Corp., for example, is focused on Fintech and other technology targets headquartered in “Europe, Israel, the Middle East or North America,” while byNordic Acquisition Corporation is focused on Fintech targets in Northern Europe, specifically “the Nordic and Scandinavian countries, the Baltic states, UK and Ireland, Germany, France and the Benelux countries.”
From a valuation standpoint, some Fintech SPACs limit their search to targets within a specified valuation range, while others do not specify a particular range. VPC Impact Acquisition Holdings, for example, is focused on Fintech targets with an enterprise value of approximately $800 million to $2 billion, while Fusion Acquisition Corp. is focused on Fintech targets with an enterprise value of approximately $750 million to $3 billion.
FINTECH SECTOR SPAC IBCS
San Francisco-based Fintech investment bank FT Partners has described 2020 as the “most active year ever” for SPAC IBCs in the Fintech sector. Over 15 Fintech SPAC IBCs were announced in 2020, among the largest of which were United Wholesale Mortgage’s combination with Gores Holdings IV Inc. at a $16.1 billion valuation in September 2020, which is considered to be the largest SPAC merger of all time; MultiPlan’s combination with Churchill Capital Corp III at an $11 billion valuation in July 2020; and Paysafe’s combination with Foley Trasimene Acquisition Corp. II at a $9 billion valuation in December 2020. Other Fintech SPAC IBCs of note include Opendoor’s combination with Social Capital Hedosophia Holdings Corp. II at a $4.8 billion valuation in September 2020; Paya Inc.’s combination with FinTech Acquisition Corp III at a $1.3 billion valuation in August 2020; Triterras Fintech’s combination with Netfin Acquisition Corp. at a $674 million valuation in July 2020; and Katapult’s planned combination with FinServ Acquisition Corp. at a $1 billion valuation as announced in December 2020. Given the number of Fintech SPACs launched in 2020 that are actively searching for Fintech acquisition targets, additional Fintech SPAC IBC deals are expected in 2021.
Although some analysts view the SPAC market as having potentially “reached its limit,” particularly in light of growing concern over SPAC transaction-related litigation risk and the resultant increase in SPAC Director & Officer insurance policy premiums, others are bullish and predict that the boom in SPAC transactions will not only continue in 2021, but will also expand internationally into non-U.S markets,most notably in Europe. SPAC transactions in the Fintech sector, in particular, are likely to persist at a steady pace in 2021 given the sector’s strong revenue and growth projections, as well as continued demand for Fintech products and services in response to ongoing COVID-19 pandemic-related challenges. As such, SPAC-focused capital markets and M&A attorneys should pay close attention to developments in this space.
The views and opinions expressed in this article are those of the author alone and do not necessarily reflect the views of the American Bar Association. The material in this article has been prepared for informational purposes only and is not intended to serve as legal advice or investment advice.
 Q2 2020 PitchBook Analyst Note: SPACs Resurface in a Volatile Market, PitchBook, May 4, 2020. Available at https://pitchbook.com/news/reports/q2-2020-pitchbook-analyst-note-spacs-resurface-in-a-volatile-market. See also Q3 2020 PitchBook Analyst Note: The 2020 SPAC Frenzy, PitchBook, August 31, 2020. Available at: https://pitchbook.com/news/reports/q3-2020-pitchbook-analyst-note-the-2020-spac-frenzy. See also The Resurgence of SPACs: Observations and Considerations, Harvard Law School Forum on Corporate Governance, August 22, 2020. Available at: https://corpgov.law.harvard.edu/2020/08/22/the-resurgence-of-spacs-observations-and-considerations/.
 Update on Special Purpose Acquisition Companies, Harvard Law School Forum on Corporate Governance, August 17, 2020. Available at: https://corpgov.law.harvard.edu/2020/08/17/update-on-special-purpose-acquisition-companies/.
 SIFMA Insights, Spotlight: 2020, the Year of the SPAC: Explaining SPACs and Analyzing Issuance Trends, SIFMA, August 2020. Available at: https://www.sifma.org/wp-content/uploads/2020/08/SIFMA-Insights-Spotlight-SPACs.pdf. See also SPAC Transactions — Considerations for Target-Company CFOs, Cooley & Deloitte, October 2, 2020. Available at: https://www.cooley.com/news/insight/2020/2020-10-02-spac-transactions-considerations-for-targetcompany-cfos.
 VPC Impact Acquisition Holdings, Prospectus, September 22, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1820302/000119312520253319/d10733d424b4.htm.
Q3 2020 Emerging Tech Research: Fintech, PitchBook, November 3, 2020. Available at: https://pitchbook.com/news/reports/q3-2020-emerging-tech-research-fintech.
 Foley Trasimene Acquisition Corp. II Closes Partial Exercise of IPO Over-Allotment Option, BusinessWire, August 26, 2020. Available at: https://www.businesswire.com/news/home/20200826005729/en/Foley-Trasimene-Acquisition-Corp.-II-Closes-Partial-Exercise-of-IPO-Over-Allotment-Option.
 Fintech-focused SPAC FTAC Olympus Acquisition closes IPO, S&P Global Market Intelligence, August 31, 2020. Available at: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/fintech-focused-spac-ftac-olympus-acquisition-closes-ipo-60136338.
 Dragoneer Growth Opportunities Corp. Announces Pricing of $600,000,000 Initial Public Offering, BusinessWire, August 13, 2020. Available at: https://www.businesswire.com/news/home/20200813005845/en/Dragoneer-Growth-Opportunities-Corp.-Announces-Pricing-of-600000000-Initial-Public-Offering.
 Former NYSE President’s second SPAC Far Peak Acquisition prices $550 million IPO at $10, Renaissance Capital, December 3, 2020. Available at: https://www.renaissancecapital.com/IPO-Center/News/73715/Former-NYSE-Presidents-second-SPAC-Far-Peak-Acquisition-prices-$550-million.
https://www.sec.gov/Archives/edgar/data/1828478/000119312520323022/d50198ds1.htm. See also SoftBank Jumps on the SPAC Bandwagon, Wall Street Journal, December 22, 2020. Available at: https://www.wsj.com/articles/softbank-jumps-on-the-spac-bandwagon-11608634587
 FinTech Acquisition Corp. V, Prospectus, December 3, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1829328/000121390020041405/f424b41220_fintechacqv.htm. See also FinTech Acquisition Corp. V Announces Completion of $250,000,000 Initial Public Offering, Including Exercise of Over-Allotment Option, GlobeNewswire, December 8, 2020. Available at: https://www.globenewswire.com/news-release/2020/12/09/2141839/0/en/FinTech-Acquisition-Corp-V-Announces-Completion-of-250-000-000-Initial-Public-Offering-Including-Exercise-of-Over-Allotment-Option.html
 Dutch Star Companies Two B.V., Prospectus, November 16, 2020. Available at: https://www.dutchstarcompanies.com/download/951766/prospectus-dutchstarcompaniestwo.pdf.
 Hudson Executive Investment Corp., Prospectus, June 10, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1803901/000119312520165740/d846732d424b4.htm.
 FinTech Acquisition Corp. V, Prospectus, December 3, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1829328/000121390020041405/f424b41220_fintechacqv.htm. FinTech Acquisition Corp. IV, Prospectus, September 24, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1777835/000121390020028485/f424b4_fintechacqcorp4.htm.
 Concord Acquisition Corp, Prospectus, December 7, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1824301/000121390020041867/f424b4_concordacquicorp.htm.
 Golden Falcon Acquisition Corp., Prospectus, December 1, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1823896/000119312520307287/d167933ds1.htm.
 Motive Capital Corp, Amendment No. 1 to Form S-1, December 8, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1827821/000110465920133130/tm2032742-6_s1.htm.
 North Mountain Merger Corp., Prospectus, September 18, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1819157/000114036120020889/nt10014112x7_424b4.htm.
 Far Peak Acquisition Corp, Prospectus, December 3, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1829426/000119312520309439/d26326d424b4.htm.
 Ribbit LEAP, Ltd., Prospectus, September 14, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1818346/000104746920004858/a2242371z424b4.htm.
 Golden Falcon Acquisition Corp., Form S-1, December 1, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1823896/000119312520307287/d167933ds1.htm.
 byNordic Acquisition Corporation, Form S-1, August 28, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1801417/000121390020024311/fs12020_bynordicacq.htm.
 VPC Impact Acquisition Holdings, Prospectus, September 24, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1820302/000119312520253319/d10733d424b4.htm.
 Fusion Acquisition Corp., Prospectus, June 29, 2020. Available at: https://www.sec.gov/Archives/edgar/data/1807846/000121390020016189/f424b4062820_fusion.htm.
CEO Monthly Market Update & Analysis, FT Partners, December 2020. Available at: https://www.ftpartners.com/fintech-research/monthly-sector-reports.
 United Wholesale Mortgage Goes Public in Biggest SPAC Deal Ever, Wall Street Journal September 23, 2020. Available at: https://www.wsj.com/articles/united-wholesale-mortgage-to-go-public-via-merger-with-gores-spac-11600828200.
 MultiPlan to Go Public in Merger with Churchill Capital Entity, Wall Street Journal, July 12, 2020. Available at: https://www.wsj.com/articles/multiplan-to-go-public-in-merger-with-churchill-capital-entity-11594593000.
 Foley Trasimene Acquisition Corp. II and Paysafe, A Leading Global Payments Provider Focused on Digital Commerce and iGaming, Announce Merger, Paysafe Group, December 7, 2020. Available at: https://www.paysafe.com/us-en/paysafegroup/news/detail/foley-trasimene-acquisition-corp-ii-and-paysafe-a-leading-global-payments-provider-focused-on-digital-commerce-and-igaming-announce-merger/.
 Home Buyer Opendoor Is Going Public in $4.8 Billion Merger, Forbes, September 15, 2020. Available at: https://www.forbes.com/sites/noahkirsch/2020/09/15/home-buyer-opendoor-is-officially-going-public-in-48-billion-deal/?sh=3c4dd507134f.
 Paya and FinTech III Announce Merger Agreement, BusinessWire, August 3, 2020. Available at: https://www.businesswire.com/news/home/20200803005351/en.
 Singapore’s Triterras Fintech plans listing, Netfin Acquisition merger, S&P Global Market Intelligence, July 29, 2020. Available at: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/singapore-s-triterras-fintech-plans-listing-netfin-acquisition-merger-59651728.
 Fintech Katapult to go public through merger with SPAC FinServ, that values company at $1 billion, MarketWatch, December 18, 2020. Available at: https://www.marketwatch.com/story/fintech-katapult-to-go-public-through-merger-with-spac-finserv-that-values-company-at-1-billion-2020-12-18.
 See also An Avalanche of SPAC M&A Deals Predicted for Q1 of 2021: Lawsuits Certain to Follow, Woodruff Sawyer, January 3, 2021. Available at: https://woodruffsawyer.com/mergers-acquisitions/avalanche-spac-ma-deals-predicted-q1-2021/.
 ANALYSIS: Investor Hunger for SPACs Is Hitting Limits . . . for Now, Bloomberg Law, November 16, 2020. Available at: https://news.bloomberglaw.com/securities-law/analysis-investor-hunger-for-spacs-is-hitting-limits-for-now. See also Q4 2020 PitchBook Analyst Note: 2021 US Venture Capital Outlook, PitchBook, December 11, 2020. Available at: https://pitchbook.com/news/reports/q4-2020-pitchbook-analyst-note-2021-us-venture-capital-outlook.
https://www.clearygottlieb.com/-/media/files/alert-memos-2020/spac-sponsors-beware--the-rising-threat-of-securities-liability.pdf. See also Litigation Risk in the SPAC World, Quinn Emanuel Urquhart & Sullivan LLP, 2020. Available at: https://www.quinnemanuel.com/the-firm/publications/litigation-risk-in-the-spac-world/.
https://woodruffsawyer.com/mergers-acquisitions/spac-exuberance-perfect-storm-do-insurance/. See also How Much Is That D&O Premium? Eye-Popping D&O Price Increases Confound SPAC Sponsors, Woodruff Sawyer, October 21, 2020. Available at: https://woodruffsawyer.com/mergers-acquisitions/do-price-increases-confound-spac-sponsors/.
 219 ‘blank-check’ companies raised $73 billion in 2020, outpacing traditional IPOs to make this the year of the SPAC, according to Goldman Sachs, Business Insider, December 18, 2020. Available at: https://markets.businessinsider.com/news/stocks/spacs-raised-73-billion-more-than-traditional-ipos-blank-checks-2020-12-1029906693.
 Dealbook Newsletter: The Year in Deals Can Be Summed Up in 4 Letters, New York Times, December 19, 2020. Available at: https://www.nytimes.com/2020/12/19/business/dealbook/deals-mergers-acquisitions-2020.html.
 SPACs Cross the Atlantic, Baker McKenzie, December 21, 2020. Available at: https://www.bakermckenzie.com/en/insight/publications/2020/12/spacs-cross-the-atlantic.
 Fitch Ratings 2021 Outlook: North America & Europe FinTech, Fitch Ratings, December 3, 2020. Available at: https://www.fitchratings.com/research/corporate-finance/fitch-ratings-2021-outlook-north-america-europe-fintech-03-12-2020. See also The Fintech Industry in 2021, American Banker, December 17, 2020. Available at: https://www.americanbanker.com/leaders/the-fintech-industry-in-2021.
 PitchBook Analyst Note: 2021 Emerging Technology Outlook, PitchBook, December 16, 2020. Available at: https://pitchbook.com/news/reports/q4-2020-pitchbook-analyst-note-2021-emerging-technology-outlook. See also How US customers’ attitudes to fintech are shifting during the pandemic, McKinsey & Company, December 17, 2020. Available at: https://www.mckinsey.com/industries/financial-services/our-insights/how-us-customers-attitudes-to-fintech-are-shifting-during-the-pandemic.