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Beyond its SPAC merger, Acorns will have to navigate the terrain to gain a good market stance amidst stifling competition.
Fintech startup Acorns Grow Inc is planning to make its public debut through a merger deal with a publicly-traded Special Purpose Acquisition Company (SPAC), Pioneer Merger Corp (NASDAQ: PACX). According to a report by CNBC, the deal values Acorns which runs a savings and investment product at $2.2 billion, with the deal expected to close sometime later in the second half of the year.
SPACs have grown in prominence over the past year with these firms raising as much as $100 billion in the year-to-date period. The Pioneer Merger Corp is backed by such hedge funds including Falcon Edge Capital and Patriot Global Management. When the deal is finalized, Acorns will trade on the Nasdaq Global Select Market under the ticker symbol ‘OAKS’, a symbol that affirms its mission to grow into “Mighty Oaks.”
“Now was the time to go public to accelerate our growth and get the tools of responsible wealth-making in everyone’s hands as fast as possible, when they need it most,” said Acorns CEO Noah Kerner. “We just saw this as an accelerant on that journey.”
Prior to this announcement, Acorns was on the brink of closing a private funding round, with participation from Wellington Management, Greycroft, TPG’s global impact investing platform, as well as funds managed by BlackRock Inc (NYSE: BLK). Per the CNBC report, Kerner and the sponsors of Pioneer Merger will each give up 10% of their ownership stakes as a gift to eligible customers.
Kerner revealed that John Christodoro, the Chairman of Pioneer Merger is the reason why the firm decided to embrace the SPAC route instead of a traditional Initial Public Offering.
“Acorns is not only a category leader but also a category creator. Its value proposition is built around inclusive, long-term financial wellness,” Christodoro said in a statement. “With integrity at its core, the brand has an incredibly loyal following and market leading retention rates.”
Acorns Beyond the SPAC Merger Deal: Business Outlook and Competition
Acorns provide investment options for its customers using relatively low capital. Beyond its SPAC merger deal, the company will have enough liquidity to propound on its offerings to boost its revenue.
Per the current business model it operates on, the company makes its money from the $1 subscription paid by its customers. Users can also opt for higher subscription packages in the range of $3-a-month and $5-a-month options for additional features such as bank accounts or retirement plans. Per the firm’s regulatory filing, its assets under management came in at $4.74 billion.
The hype in trading mania spearheaded by the short squeeze saga involving an army of retail investors on Reddit has benefitted brokerage apps like Robinhood Markets Inc. This investment uptick has also had a rub-off on investment apps like Acorns’ and its chief competitors Wealthfront and Betterment, all of which recorded an impressive first quarter this year.
Beyond its SPAC merger, Acorns will have to navigate the terrain to gain a good market stance amidst stifling competition. When asked about the firm’s plans to handle its competition, Kerner said “we run our own race.”
“We’re focused on long-term financial wellness and helping customers get and stay committed to their long-term financial best interests,” he said. “Our vision is to build a financial wellness system that enables everyday Americans to save and invest.“