Valuation ~$13 billion
Expected IPO in Mid-2022
One of our most anticipated IPOs expected in 2022 is for the fintech company Plaid. Plaid has an open banking ledger that allows the linking of bank data to other fintech apps. If you have connected different bank accounts or a bank to your investment account or budgeting app, you will probably have used Plaid. You may have already used their service and not known it.
The function of the ledger makes it possible for clients to transfer funds and information between accounts easily and make quick payments. Plaid's open banking feature is the reason that Visa looked to acquire them in 2020; the bid to purchase Plaid was $5.3 billion; however, the Justice Department shut down the deal, and we are fortunate enough to have an IPO opportunity later this year.
Now that the IPO possibility is becoming clear, we will look at the investment opportunity provided with a Plaid IPO. What the company does, how strong is its business model, when is an IPO possible, and see if Plaid is worth your hard-earned dollars?
What does Plaid bring to the table?
Plaid is the leader in an open banking future that the fintech industry is moving toward. Plaid's open banking ledger allows its clients to link their bank accounts and link accounts to various fintech apps. By using Plaid's application programming interface (API), banks and third-party apps can connect with users' bank accounts, the glue between the growing fintech industry. Plaid is one of only a few companies that designed this type of industry.
What is Plaid's value proposition?
Plaid makes its money by charging a small fee for its transactions. Because Plaid can facilitate transactions between different bank accounts and a wide range of apps, its technology is in high demand. A Plaid user can link their bank account with their Robinhood account, transferring money between the two in seconds.
Plaid's reach is now wide, with service between over 11,000 financial institutions. It removes the old need for micro-deposits to confirm a connection that was the past standard. Plaid also works with and links accounts to services like Venmo, Acorns, Betterment, Samsung, and many more.
How does Plaid work?
Plaid software facilitates communication between users' bank accounts and fintech apps. Once a user signs up with the new finance app, they will access the Plaid API within that app and can choose from several banks that have relationships with Plaid. The user signs up for Plaid's service, which will create a new encrypted connection to the bank, and data will be securely shared. Plaid has developed a product that is leading the fintech revolution. It has also built a huge relationship base with the largest financial institutions to make bank-to-bank and app-to-bank account connections easy.
The open banking system helps users manage and move money simply through financial institutions that work with third-party developers. Open banking is accomplished through a bank making information accessible via the Plaid API. Customers can access transaction data, account information, and new products/services.
When is the Plaid IPO?
Experts were discussing a Plaid IPO in 2021 after the Visa deal fell through, and now the talk has shifted to 2022; however, there is still no confirmation of a set Plaid IPO date. Last year, JPMorgan Chase led a series D funding round that gave Plaid $425 million cash and a valuation of $13 billion. Plaid's investors include Chase, Visa, Citibank, American Express, Spark, and others.
Suppose the $13 billion valuation is the low end of the eventual IPO value. In that case, Plaid could be one of 2022's biggest IPOs. The two other IPO rivals for the top spot/most anticipated this year are Databricks and Klarna; all three are in the tens of billions valuation range.
Sources state that in 2020 the company brought in $170 million in revenue, which was a 60% jump over the previous year. No data on revenues for 2021 has not yet been published.
Plaid IPO risks
The one benefit that Plaid has is that its investor pool already has some of the largest banks behind it (the too-big-to-fail banks) that make up much of the US financial system. The biggest risk that Plaid investors face is if there is a service that can work as a substitution for Plaid that banks choose. In the long term, if users switch to cryptocurrencies or another technology that does the same function as Plaid for a lower price with better results, Plaid could be usurped. The other issue is if Plaid gets too high of a valuation from FOMO and cannot live up to that valuation. As the IPO date becomes available, the calculation for overvaluation is needed.
The information in this article is well-researched and factual. Still, it contains opinions also, and IT IS NOT FINANCIAL ADVICE and should not be interpreted as such, do not make any financial decisions based on the information in this article; we are not financial advisors. We are journalists. You should always consult with a professional before making any investment decisions.