Payoneer, a business-to-business (B2B) payments company with worldwide connections, has set its sights on becoming publicly-traded by June, even as profits remain elusive.
The New York company aims to list shares by way of a special purpose acquisition company, or SPAC, in a sale to a blank-check company led by Philadelphia bank founder and fintech investor, Betsy Zubrow Cohen. If shareholders approve the purchase by FTAC Olympus Acquisition in an upcoming shareholder vote, Payoneer will emerge from the transaction with a $3.3 billion valuation, according to a regulatory filing for the SPAC deal. It will also have $563 million to invest in future growth, according to Chief Strategy Officer Charles Rosenblatt.
SPACs surged in popularity last year as a fast-track to going public, but companies are still testing the tool for tapping public markets. Among payments companies, Paysafe Group and Social Finance, or SoFi, also lined up for SPACs this year. Meanwhile, some payments players, including and the cross-border upstart Stripe, are choosing to stay private for now and keep absorbing plentiful venture investments.
Payoneer earns revenue from processing payments for merchants and consumers doing business at the worldwide internet marketplaces operated by juggernauts including Amazon and Ebay. That e-commerce business surged during the COVID-19 pandemic, even as some of its business processing travel transactions on the online travel site Airbnb ebbed. Overall, the company's annual revenue jumped 30% over the past two years to $345.6 million last year, up from $260.1 million in 2018, according to regulatory filings for the SPAC last month.
Payoneer CEO Scott Galit has guided the company's growth since 2010. He's a payments industry veteran who earned his credentials over several decades, with top executive positions at the banking payments business Meta Payments System and in leading Mastercard debit and prepaid operations.
He took over from Payoneer's founder, fintech entrepreneur Yuval Tal, who started the company in Israel in 2005, before the headquarters moved to New York (Tal exited his role as president last year, according to LinkedIn). Now, Payoneer has about 1,500 employees, plus about 500 contractors working from offices in 20-plus countries, Rosenblatt said in an interview. Payoneer aims to build out its offering for small and mid-sized businesses (SMBs), offering the enterprises more financial services, he said in an interview.
"B2B digital commerce is even bigger than retail e-commerce and has grown even more quickly than consumer e-commerce, with B2B digital commerce expected to be $35 trillion by 2022," the company said in its SEC filing.
While it's up against rivals like online international payments processors PayPal and Ant Group, Rosenblatt said Payoneer handles massive volumes through China, India, Ukraine and other countries. Specifically, the company moved $44 billion last year through five million marketplaces, enterprises and SMBs in 190 countries and territories, according to unaudited figures it presented to investors in February.
Payoneer expects sales to keep rising this year to $432 million on $64 billion in volume, according to a separate SEC filing last month, with help from acquisitions. In February, Payoneer agreed to pay $38.6 million to buy the German payments processing company Optile, the SEC filing said.
The SPAC transaction lets Payoneer tell investors about that prospective growth, while a traditional initial public offering would restrict such projections, Rosenblatt said. "We have seen tremendous growth," he said.
Nonetheless, the luster is coming off SPACs to some degree as some recently listed stocks decline and short-sellers bet against certain stocks. In Payoneer's case, the company warns investors in its SEC filings that the SPAC "reorganization may not be as profitable as we suspected due to limited knowledge of the target."
Indeed, Payoneer has posted net losses for the past three years, including a net loss of $23.7 million last year, and concedes in the SEC filings it faces rising competition from big tech companies Google, Apple and Facebook, and even from Amazon, the company that was the conduit for 29% of its revenue last year.
AlixPartners Managing Director Mark Flamme noted that some of his consulting firm's private equity clients investigated a possible purchase of Payoneer when it was for sale before the SPAC deal, but didn't do a deal. He declined to name the suitors or say why they didn't pursue an acquisition, but said it is difficult for a company like Payoneer to set itself apart from industry competition.
In a follow-up statement, Rosenblatt said Payoneer evaluated private equity bids, and interest from other companies, in the past few years, and ultimately picked the SPAC deal with Cohen's team as the best choice.
Rosenblatt says Payoneer has put its investors on notice that the company will remain unprofitable for the next two years as it invests in growth, including through acquisitions. He wouldn't say exactly how much capital the SPAC transaction will provide.
In a positive sign for winning over investors to the Payoneer SPAC deal, the company increased the amount of money it's seeking from a related private investment in public equity, or PIPE transaction. Payoneer raised that target 50% to $300 million from $200 million in January because of "strong investor demand," according to one SEC filing.