Will Plaid SPAC or IPO in 2025?

Key Points

• Visa planned to acquire Plaid in 2020, but the deal was abandoned after regulators expressed concerns.

• The fintech recently raised capital at a $6.1 billion valuation.

• Plaid’s management has said that an IPO won’t happen in 2025 but that it will at some point.

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There are several highly anticipated financial technology, or fintech, IPOs that are likely to occur within the next few years. One of them is financial data network operator Plaid, which connects financial institutions and applications, and was former a Visa (NYSE: V) acquisition target.

Plaid securely connects financial institutions and applications. For example, when I wanted to link my checking account to make mortgage payments at a different bank, Plaid was the tool that was used to connect them. When I wanted to verify income deposits into my bank account for loan approval purposes, it was Plaid that made it possible. These are just a few examples, and there are many others, such as connecting with your bank account to set up secure, recurring payments.

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Plaid's traction has been impressive. Over half of all U.S. adults have used the platform, and from a business perspective, offering Plaid's seamless connectivity results in 25% higher sign-ups. The company makes its money primarily through volume-based subscription plans sold to business customers.

Image source: Getty Images.

At this time, we don't know Plaid's exact IPO timeline. But the company has made it clear that an IPO is in the future, so here's what investors should keep in mind and what we know so far.

Plaid's failed merger and recent funding activity

Plaid was founded in 2013 and has grown impressively, connecting with well over 11,000 financial institutions in the U.S. and elsewhere. In 2020, the company agreed to be acquired by Visa for $5.3 billion, but the deal ended up being cancelled because the Department of Justice sued to block it over antitrust concerns.

More recently, Plaid raised $575 million in fresh capital in April of this year at a $6.1 billion valuation. This is less than half of its peak valuation in a 2021 funding round but is still more than the $5.3 billion Visa had been prepared to pay. And to be clear, it's very common for private tech companies to command lower valuations in today's market environment than in the 2021 zero-interest days.

Will Plaid go public or SPAC in 2025?

The recent fundraising round should take care of Plaid's near-term capital needs and makes an IPO in 2025 highly unlikely. At the time of the raise, a company spokesperson specifically said that Plaid won't go public in 2025. Of course, that isn't a guarantee that we won't see an IPO, and if the tech IPO market and valuations heat up, it's still entirely possible.

It's also worth noting that Plaid doesn't necessarily need to use a traditional IPO to go public. Special-purpose acquisition companies, or SPACs, are making a comeback this year. Through the end of the second quarter, 71 of these blank-check companies have listed on the public markets in search of merger targets, more than in all of 2024, and this can be a desirable way to go public and raise lots of capital at the same time.

Finally, just because management has said that an IPO won't happen this year doesn't mean something -- either a traditional IPO or SPAC merger -- won't be announced by the end of the year. The short version is that Plaid is likely to go public within the next few years, but the timeline remains uncertain -- for now.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.