The Next Fintech Windfall

August 7, 2020

Online shopping kicked into a higher gear since the pandemic.

With more people buying online than ever, the fintech industry is also booming.

Companies like Shopify and PayPal are through the roof this year:

Now, these companies and this industry as a whole are taking the next step: financing.

Historically, financing was only something you could get for big-ticket items like houses, cars, and appliances. Now, you’re going to be able to make installment payments on shoes, clothes, and groceries.

Credit cards have filled in these gaps for decades. And the likes of Visa and Mastercard are still kings at this kind of “financing.”

But it takes weeks to apply for, receive, and activate a credit card. What if you could just decide to make six payments for that new jacket you just found online today?

That’s not only coming. It’s already here.

Securing Monster Deals Ahead of Yet Another Mouthwatering IPO

Affirm Inc. is a point-of-sale lender. Meaning, when you get to your online checkout cart, it is waiting there with an offer to chop up what you owe into bite-sized payments.

The company offers no fees, but does charge substantial interest rates, as you can imagine. But its credit check process is instantaneous and painless.

Now, I’m not suggesting you go out and finance everything you want to buy online. The fees will kill you.

But with a recent insider news story, Affirm’s potential IPO is worth knowing about now. No matter how high the offering goes from here, there could be room for it to run in today’s market.

Let’s back up.

The Wall Street Journal recently scooped that Affirm is looking at both a straight-up IPO with the help of Goldman Sachs, as well as a backdoor IPO with a special purpose acquisition company or SPAC.

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Either way, it is already gaining huge interest. Last year, the company was valued at just $2.9 billion. Today, the Journal reports that insiders are looking at a $10 billion price tag.

And, while many market participants have seemingly lost their minds on valuing these tech darlings, that more than tripling in price is actually justified.

You see, the company has been extremely successful in partnering with the very companies it needs to.

Last year, Affirm locked in a deal with Walmart to offer financing options at nearly 4,000 Supercenters and on Walmart.com.

This year, just last month, in fact, the company got Shopify to link arms. This deal includes a second layer, however. Affirm is going to provide the financing and collection side, while Shopify can market it as Shop Pay Installments. That’s supposed to launch later this year.

These partnerships are enormous. Combine that with the fact that Affirm’s founder Max Levchin co-founded PayPal back in the day. So, this relatively unknown fintech is well connected.

What to Expect in an IPO

There are three major pieces to watch leading up to a potential IPO. Two are looking great for Affirm. One is going to be an obstacle. But if it can overcome that, it will be monstrously profitable for early investors.

First, the IPO market itself. There’s really not been as good of a time to go public in years as it is right now.

Recent first-month booms include ZoomInfo Technologies (up more than double its IPO price), Vroom (up nearly three times its initial price tag) and yesterday’s Rocket Companies (already up 36% in one day and counting).

All three deal with e-commerce and sales. Affirm’s business lines up with what the market is buying.

Second, the Shopify launch. The deal is struck, the ink is dry. Now we wait and see if the implementation of Shop Pay Installments proceeds without a hitch. If it does, a similarly-timed IPO will only gain more interest.

Finally, the obstacle. The company is a lender. That’s more complicated than many fintech's out there. To go public, it will be forced to allow everyone on Wall Street pry through its books.

That can go either way. If even the hint of something ugly in its loan books pops up during the pre-IPO period, that could be a killer.

However, if it checks out, that will only increase enthusiasm.

While the company has yet to officially comment on this potential IPO, Wall Street Journal’s reporting is rock solid here.

An IPO or deal with a SPAC is extremely likely by the end of this year. If that $10 billion price tag holds until then, look for yet another double or triple profit opportunity at launch. 

It's shaping up to be an exciting opportunity and I'll keep you updated when more specifics become available.

To your prosperity,

Joshua M. Belanger
Executive Publisher & Founder

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%

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