US debit and credit card issuing firm Marqeta Inc. (MQ) is going public on the Nasdaq Global Select Market next week. The initial public offering (IPO) comes as the growth of digital payments during the COVID-19 pandemic has more than doubled the company’s processing volume.
Fintech IPOs remain popular with investors. Payment services firm Flywire (FLYW) and cloud-based bill payments provider Paymentus (PAY) both went public last week and made sharp gains in their first day of trading.
Will Marqeta’s IPO similarly take off? We’ve got the details you need to know to decide whether to get in on the stock from the beginning.
Digital transition drives Marqeta processing volumes
Marqeta was founded in 2010 by Jason Gardner, who previously co-founded property rental platform PropertyBridge, which was acquired by MoneyGram International (MGI) in October 2007. The company provides an open application programming interface (API) modern card-issuing platform for companies to issue payment cards to their staff and process customer transactions. The platform was launched publicly in 2014.
Marqeta’s customers include Square (SQ), Uber (UBER), DoorDash (DASH), Afterpay (AP) and Klarna, according to its prospectus filed with the Securities and Exchange Commission (SEC). Its processing platform offers just-in-time (JIT) funding, allowing companies to authorise and finance each transaction in real time, freeing up capital and improving cash flow.
For dual transactions where the clearing and settlement is done after the authorisation, such as processing restaurant tips after a meal is paid for, Marqeta receives the clearing files from the network, processes the transactions and communicates back to the network daily.
Marqeta provides direct integrations with the payment card networks, including Visa, Mastercard, and PULSE, which is part of the Discover Global Network. That enables developers to use a single unified platform for all of their payment integrations.
Marqeta also offers customisable prepaid cards that power on-demand service use cases from ride sharing to grocery delivery.
The company’s S-1 filing said: “Marqeta has already emerged as a card-issuing platform category leader in many disruptive verticals, including on-demand delivery, alternative lending, expense management, disbursement, digital remittances, and digital banks, and our platform is sought out by large financial institutions to improve their existing offerings and stay competitive with technology-focused new market entrants.”
In the three months ending 31 March 2021, the company reported a total processing volume (TPV) of $24bn, up by 167% from $9bn in the three months ending 31 March 2020, according to the SEC filing.
The COVID-19 pandemic has accelerated the shift to digital payments as lockdowns have prompted consumers to make use of online shopping and grocery delivery. Visa estimates that the share of global retail commerce conducted online will more than double to 19% in 2022 from 9% in 2019, the filing said.
Bain & Company estimates that because of the effects of the pandemic, the percentage of global digital transaction volumes in 2025 will increase from 57% to 67%. In the meantime, McKinsey noted that five years of change have happened in a few months because of the pandemic, with global cash payments falling by 4-5 times the annual decline seen over the last few years.
Jason Gardner commented: “According to Euromonitor, this year alone, the market for global money movement is estimated to be $74trn, representing approximately four trillion individual payment transactions. The size of this market is staggering, and most of this volume lives on legacy platforms.”
Marqeta reported a 123% year-on-year increase in net revenue in the first quarter of 2021 and reduced its net loss by 12% to $12.8m. Its annual revenue increased by 103% in 2020 to $290.3m and the net loss declined by 18% to $47.7m.
The company expects to continue to incur net losses “for the foreseeable future” as it expands its infrastructure and operations in the US and internationally, it said in the filing.
Marqeta expands partnerships ahead of listing
In April, Marqeta announced the launch of a new prepaid Visa card for customers of Shakepay, a Canadian fintech platform that allows customers to buy and sell bitcoin (BTC) and pay family and friends. The card is issued by Marqeta’s sponsoring financial institution Peoples Trust Company.
Shakepay CEO Jean Amiouny said: “As we looked at the best way to develop a prepaid card to complement the Shakepay wallet, and build out an excellent user experience, it became clear that Marqeta was the only card issuer capable of meeting our needs.”
In May, the company announced a partnership with Swissquote to power an all-in-one app-based card program that connects banking and trading via a virtual card. Swissquote will use Marqeta’s open APIs to allow its customers to perform a range of money management and trading functions. It also announced a partnership with Afterpay to help power its in-store digital card offering in Australia and New Zealand.
Marqeta IPO: everything you need to know
The Marqeta IPO date is set for 9 June, according to the Nasdaq schedule.
The company is offering 45.45 million shares and, in an update to its IPO prospectus on 1 June, set the initial price range between $20 and $24 per share. That values the IPO at around $900m to $1.09bn and suggests an overall Marqeta valuation of more than $12bn. The final Marqeta (MQ) stock price will be set on 8 June.
The valuation is well above the $4.3bn estimated when Marqeta secured its last funding round of $150m in May 2020. According to Crunchbase, the company has raised a total of $528m. Investors including 83North, DFS Services, Granite Ventures, ICONIQ Capital and Coatue each hold more than 5% ownership stakes, Marqeta said in the SEC filing.
The company estimates that it will receive net proceeds from the listing of around $921.5m, based on an offering price of $22 per share, the midpoint of the range. It intends to use the proceeds to increase its capitalisation and financial flexibility and create a public market for its stock.
The underwriters for the IPO include Goldman Sachs, JP Morgan, Citigroup Global Markets and Barclays Capital. They have the option, exercisable until the end of June, to purchase up to an additional 6.8 million shares.
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