By Shivaum Bapu, Daniel Winsor, Pristie Sharma, Mohammed Safayat and Tim Li (UCL), Aadit Jain, Andras Szabo, Faria Rasuli and Matilda Oculy (The University of Manchester)
Photo: Stephen Phillips (Unsplash)
Overview of the deal
Acquirer: InterPrivate III Financial Partners
Target: Aspiration Partners
Implied Equity Value: $2.3B
Total Transaction Size: $2.7B
Closed date: 18/08/2021
Target advisor: Citi, Union Square Advisors, Latham & Watkins
In the latest testament to the explosive growth of FinTech and sustainable investing, Aspiration Partners has landed a deal to become the first publicly traded FinTech firm focused primarily on socially responsible spending, saving and investing.
Aspiration has agreed to merge with blank-check company InterPrivate III Financial Partners in a transaction that values the eight-year-old company at $2.3 billion, more than double its last private-market valuation in May 2020. The transaction implies a 7.7x implied enterprise value to projected 2022 revenue of $254 million and 3.8x projected revenue of $508 million for 2023. InterPrivate III and other investors will give Aspiration $412 million in cash to use towards growth initiatives.
Though Aspiration reportedly struggled to raise capital in 2019, the company—like many other FinTechs’ massive growths during the pandemic. Its customers have more than doubled, reaching five million over the past year, and the company says revenues are on track to grow seven-fold in 2021 to more than $100 million. It was named to the Forbes Fintech 50 for the first time this year. Aspiration's stock is expected to start trading on the New York Stock Exchange under the ticker ASP in the fourth quarter, but the deal is still subject to shareholder approval.
“Our thesis was to find a high growth company that had achieved the scale and profitability profile to become a public company, and that would benefit not only from our capital but from our experience and strategic relationships. Aspiration fits these characteristics and we are excited to share their story.” - Ahmed Fattouh, Chairman and CEO (InterPrivate Acquisition Partners)
Company Details: (Acquirer - InterPrivate III Financial Partners Inc)
InterPrivate III Financial Partners Inc is a special purpose acquisition company (SPAC) owned by InterPrivate Acquisition Partners, a private investment firm that invests on behalf of family offices with independent private equity and venture capital sponsors. It aims to identify high-growth companies in the financial services industry, focusing on technology-enabled companies with an enterprise value of $1BN or more, and guide their development. On March 9th 2021, the company completed its $258.75M IPO and now trades on the NYSE. The company has no operations or revenues.
Founded in 2020, headquartered in New York, New York (USA)
CEO: Ahmed Fattouh
Market Cap: $326.4M (as of 27/08/2021)
EV: $325.8M
Company Details: (Target - Aspiration Partners)
Aspiration Partners is a financial technology company that offers investment advisory and consulting services to over five million customers in the United States. The company offers sustainable banking services and aims at tackling climate change by helping its customers reach carbon zero.
Founded in 2013, headquartered in Marina del Rey, California (USA)
CEO: Andrei Cherny
Number of employees: 180
LTM Revenue: $100M
Projections and Assumptions
Short-term consequences
Following the merger, with InterPrivate, Aspiration will become the first ESG fintech with a unique platform enabling individuals and enterprises to integrate and automate impact into their everyday financial and commercial transactions according to Fattouh, CEO and Chair of InternPrivate III. As part of the deal, InterPrivate III and other investors will give Aspirations up to $412 million in cash - nearly double the $255 million it previously raised - to use towards marketing and further investment in product innovation and technology.
The fintech is also planning to launch a credit card this year and has pledged to plant a tree for every transaction customers make. Customers will receive up to 1% cash-back on all purchases during months in which they are carbon neutral.
The deal will also provide $258.75 million of cash held by InterPrivate III in trust and a $200 million fully committed common stock private investment in public equity (PIPE).
Upon the close of the transaction, the company will be named Aspiration, Inc., and will be listed on the New York Stock Exchange under the ticker symbol “ASP”. Andrei Cherny, Aspiration’s CEO and co-founder, will remain CEO of the combined company, while Aspiration co-founder and board member Joe Sanberg will continue to serve on the board.
Upon the close of the transaction, the company will be named Aspiration, Inc., and will be listed on the New York Stock Exchange under the ticker symbol “ASP”. Andrei Cherny, Aspiration’s CEO and co-founder, will remain CEO of the combined company, while Aspiration co-founder and board member Joe Sanberg will continue to serve on the board.
Long-term Upsides
The recent news about Aspiration is part of a larger wave of creation of SPAC IPO’s over traditional IPO’s. Since 2018, there has been a rapid rise of SPAC IPO’s, a trend that is set to continue, creating a larger demand for private companies, given the 2-year time limit of SPACs to find a company for a merger. This leaves a lot of room for negotiation for private companies, which may result in a further rise of SPAC mergers.
InterPrivate Acquisition Partner’s merger with Aspiration Partners represents a strategic relationship that will enable Aspiration to have access to experienced managers. A notable name on InterPrivate III’s board is John McCoy, who oversaw over 100 acquisitions during his tenure as Chairman and Chief Executive of Bank One Corp.
In the long-term, if this merger proves to be successful for Aspiration, it may encourage other FinTechs to offer sustainable products to their customers, which would include environmental, social and governance (ESG) investing approaches. Hence, considering the substantial consumer demand for sustainable investing, if the deal results in major growth for Aspiration, we may see the share of environmentalist FinTechs in the market expand, with more companies making a drastic shift to sustainability.
Risks and Uncertainties
Going public via a SPAC merger is favoured mainly by companies that are concerned about high IPO costs. However, even firms that do not have a problem with high costs often find themselves in a predicament where they realise how costly and time consuming it is to be a public company with myriads of disclosing obligations to the SEC and other regulatory agencies. Considering the financial hardships Aspiration has already experienced in the past, establishing a well-functioning controlling and reporting department whilst spending heavily on marketing and innovation might cause hardships for the company.
It is also common that SPAC sponsors have significant ownership (usually 20%) in the vehicle, which is set out as a tool for promotion. Consequently, the sponsors hold a significant portion of votes in the merged entity and therefore in case the ideas of Aspiration’s management are not in line with that of the SPAC sponsor and the other PIPE investors, difficulties might emerge when it comes to voting on important corporate affairs in the future.
”Aspiration is a truly unique asset – it will be the first sustainability-driven financial services company in the public markets. In a larger sense, Aspiration has created the sustainability-as-a-service category and it is the first platform that allows individuals and corporations to automate and integrate environmental and social impact into their financial and commercial activities.” - Ahmed Fattouh, Chairman and CEO (InterPrivate Acquisition Partners)