Financial technology, or fintech, is finally getting the recognition it deserves as funding pours in and investors begin to warm up to its risky nature. Solving the technological shortcomings of banking institutions and easing payment processes while increasing consumer protection, companies under the segment have been quite instrumental in improving the quality of financial services for both customers and entrepreneurs. Following the success of Lending Club, WePay and Kabbage, dozens of fintech start-ups have entered the fray, and it didn’t take venture capitalists long to flirt with the idea of betting on them.
According to the Economic Times, the industry is now worth US$4.7 trillion (AU$6.6 trillion), and have raked in US$12 billion (AU$16.9 billion) in capital in 2014 alone, from just US$4 billion (AU$5.6 billion) in 2013. Wanting in on the profits, London-based company, Silver Falcon (LSE: SILF), is eyeing the segment for acquisitions. CityAM reports that the company, which is, as of this writing, a shell corporation, has set its sights on the emergent sub-s ector due to its astonishing growth in recent years.
In the United Kingdom alone, fintech has drawn £357 million (AU$764 million) of venture capital investment this year, reflecting a sharp increase from last year’s US$487 million (AU$686 million). CityAM notes that “high-profile deals,” including those of Funding Circle, WorldRemit and TransferWise, have tremendously contributed to the healthy numbers. Thus, it’s no surprise that companies such as Silver Falcon are scrambling to strike while the iron is hot.
Spearheaded by seasoned corporate financiers Geoffrey Dart, Peter Redmond and Adrian Beeston, the company’s placement was oversubscribed, with 43,300,000 ordinary shares offered at £0.03 (AU$0.06).
"Silver Falcon has been formed for the purpose of making acquisitions in the financial services sector. We look forward to acquiring companies that generate value for our shareholders through operational improvements, along with potential further complementary acquisitions," Dart, the company’s chairman, said in a statement.
According to a separate release on Fintech Newswire, the company’s biggest shareholders include Optiva Securities, which owns 5 million ordinary shares, or 7.70 percent of the issued ordinary share capital. Company directors, Dart, Redmond and Beeston, meanwhile, o wn 4.8 million shares (7.39 percent), 3.6 million shares (5.54 percent), and 3.35 million shares (5.16 percent), respectively.
Beeston noted in an email that they see themselves merging with another candidate in the fintech business in a few months. According to him, they will likely change their company name at that point.
“It is hard to say where the company will be in five years’ time, but the goal is to vend a deal in as quickly as possible that has a huge upside to capitalise on the demand in the market,” Dart added.
A recent pullback in the segment last week sent Lending Club crashing to below its IPO price. LoanDepot, which was set to go public, announced that it would rather hold back due to market conditions, while Jack Dorsey’s Square Inc. is bracing for its IPO this week. In a Market Watch report, ACI Worldwide senior solutions consultant for digital channels Mark Ranta noted that the correction "was creating reasonable valuations" from the sector after member stocks had skyrocketed.
Asked if he thought the sector is overvalued, Beeston said that fintech isn’t overvalued at all. While London is the main market for fintech, it hasn't had the crazy valuation that online firms have had. “Fintech also generally tries to solve obvious needs in the market like a free broker. The same I believe can't be said for the general Internet bubble,” he reflected.
Dart was also optimistic about the segment’s promise. He said that fintech is just starting in London so it’s expected that more companies will join the market.
Redmond believed that companies operating under the segment will over time make the financial market more responsive to people’s needs and desires. “It will make it cheaper and more effective to participate in financial transaction. Just look at Square, Inc. and how it disrupted retail and e-commerce,” he comments.
Silver Falcon trades on the London Stock Exchange under the ticker symbol, SILF.
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