Noah Kerner, CEO of Acorns.
Adam Jeffery | CNBC
Savings and investment app Acorns plans to go public by merging with a blank check company.
The fintech start-up announced a cooperation agreement with Pioneer Merger Corp., a listed special purpose vehicle (SPAC), on Thursday. The merger valued Acorns at approximately $ 2.2 billion and is expected to close in the second half of this year.
When it’s done, Acorns will trade on the Nasdaq under the OAKS symbol – a nod to the company’s motto and the analogy of growing acorns into “mighty oaks.”
“Now was the time to go public to accelerate our growth and get the tools for responsible welfare into everyone’s hands as quickly as possible when they need it most,” said Noah Kerner, CEO of Acorns. “We only saw this as an accelerator on this journey.”
Institutional Investors Wellington Management, Greycroft, TPG’s global impact investing platform, and funds managed by BlackRock have also committed to a private placement as part of the announcement. The Kerner and Pioneer sponsor each plan to contribute 10% of their personal Acorns property as a gift to eligible Acorns customers.
The company was last valued at less than $ 1 billion and has attracted venture investments from companies like PayPal Ventures, BlackRock, Ashton Kutcher, Jennifer Lopez and Dwayne Johnson, according to PitchBook.
(Comcast owns CNBC’s parent company, NBCUniversal, and is an investor in Acorns. CNBC has a content partnership with Acorns.)
Acorns, of Irvine, Calif., Was in the process of closing another round of private funding, Kerner said, but opted for the recently popular SPAC route. He pointed to John Christodoro, a PayPal board member and chairman of Pioneer Merger, as the right partner and a reason Acorns bypassed a traditional IPO.
“Acorns is not just a leader in categories, it is a category creator. Its value proposition is based on inclusive, long-term financial wellbeing,” Christodoro said in a statement. “With integrity at its core, the brand has an incredibly loyal following and market-leading retention rates.”
Acorns’ most popular offerings allow customers to automatically invest the change from debit or credit card purchases in index funds. Since the start in 2014, the offer has been expanded to include educational offers, banking products, a debit card and an automated retirement savings account.
Special purpose vehicles, called SPACs, raise money through a shell company to buy an existing business. This is a popular way for later venture-funded startups to get quick listings in public markets this year. However, according to SPAC Research, new issues from SPACS declined in April. According to SPAC Research, there were only 10 new issues on the market, up from 109 in the previous month.
The Acorns list follows record growth in app investment during the pandemic. Part of that was thanks to the frenzy over GameStop and other meme stocks. The commercial frenzy has drawn new attention to the markets, drawing millions of first-time investors to platforms such as Schwab, Robinhood and Interactive Brokers.
But it also benefits passive investment apps. Wealthfront and Betterment both had their best quarters in history to start the year. Kerner said the first quarter was also the best three months in Acorns’ history. Subscribers doubled to 4 million by the fourth quarter. The start-up’s turnover consists of around 80% subscription fees and 20% transaction fees and brand partnerships.
When asked about the growing competition, Kerner said: “We drive our own race.”
“We are focused on long-term financial wellbeing, helping clients get involved and remain committed to their long-term financial interests,” he said. “Our vision is to build a financial wellness system that enables everyday Americans to save and invest.”