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 deal with Pioneer Merger Corp., a listed special purpose vehicle company, on Thursday. The merger valued Acorns at approximately $ 2.2 billion and is expected to close in the second half of this year.
When complete, 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 put the tools for responsible wealth creation into everyone’s hands as soon as possible when they need it most,” said Noah Kerner, CEO from 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. Kerner and Pioneer sponsors each plan to donate 10% of their personal Acorns property as a gift to eligible Acorns customers.
The company, which was last valued at less than $ 1 billion, 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, and 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 also 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.”
Acorn’s mobile application
Acorns’ most popular offerings allow customers to automatically invest change from debit or credit card purchases into index funds. Since its introduction in 2014, the offer has been expanded to include educational offers, banking products, a debit card and an automated retirement savings account.
SPACs raise money through a shell company to buy an existing company. This is a popular way for later venture-backed 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 for investment in apps during the pandemic. Part of that was thanks to the frenzy over GameStop and other meme stocks. The commercial frenzy has given the markets renewed attention, driving 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 startup’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 Americans to save and invest on a daily basis.”
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns, and CNBC is in a content partnership.