FinTech Acquisition III (FTAC) is a blank check company created for the purpose of acquiring a private financial technology business. Blank check companies are also known as special purpose acquisition companies (SPACs) and have been used as a backdoor way for a company to go public.
There is some valid criticism that, by avoiding a traditional IPO process, SPAC offerings are riskier because they do not face the full rigor and scrutiny from bankers, investors, and auditors. However, there is good reason to believe that FinTech Acquisition III can deliver strong results for investors.
An experienced management team
In a blank check company, a management team raises money in an IPO pre-business, and then uses the proceeds from the IPO offering to acquire a business.
As its name would imply, FinTech Acquisition Corp III intends to acquire a company in the financial technology space. Because there is so much power in the hands of the management team, it is critical that investors understand who is running the show.
FinTech Acquisition's management team consists of CEO Daniel Cohen, Chairman Betsy Cohen (Daniel Cohen's mother), and CFO James McEntee.
Daniel Cohen's background is in the banking industry. In addition to running FinTech Acquisition I and II (more on this later), he is the founder and CEO of The Bancorp, a financial holding company with over $4.2 billion in assets under management.
Daniel Cohen also founded Cohen and Company, an investment company focused on residential mortgages with over $3.2 billion in assets under management. Cohen also has served as CEO of RAIT Financial Trust, a commercial real estate company, and on several boards. Both Cohen and Company and RAIT Financial Trust were heavily exposed to the real estate market and experienced significant losses as a result of the 2008 financial crisis. Cohen and Company still trades as a public company, but RAIT Financial Trust has filed for bankruptcy.
Betsy Cohen also has an accomplished career in the financial services, which involves many of the same companies her son is associated with. Betsy Cohen served as The Bancorp's CEO, she was the founder of RAIT Financial Trust, and is the founder and prior CEO of JeffBanks.
Investors did well on FinTech Acquisition I and II
The best indication of how FinTech Acquisition III will fare as an investment is the track record from the first two iterations of the blank check company. The good news is that both of the prior versions have made investors money.
FinTech Acquisition I went public in 2015 at $10 per share and acquired payment processing company CardConnect in 2016. Just one year after the CardConnect deal, First Data acquired CardConnect for $15 per share. In other words, if you invested in FinTech Acquisition I's IPO, you could have made 50% over a two-year period -- not a bad return on investment.
FinTech Acquisition II went public in 2017 at $10 per share and acquired International Money Express (IMXI 6.35%) in 2018. International Money Express is a money transferring service which primarily serves people who remit money from the United States to Latin America. It's still a public company, which has seen its stock trade as high as $15.50, but today, its shares trade just above $12. While not as lucrative as the CardConnect deal, investors in FinTech Acquisition II have done OK.
Because there is no business to evaluate, investors must focus on judging the management team and their track record.
The good news is that Fintech Acquisition's management team appears extremely capable, and has a supportive track record from Fintech Acquisition I and II.
The tough thing about investing in a blank check company before a deal has been announced is that there is an enormous amount of uncertainty. The deal may stink and that is a big risk, but if history is any guide, the deal may work out well for investors.