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Fintech

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Fundamentals

Size Analysis: The number of publicly traded fintech companies has exhibited a gradual increase since the third quarter of 2022, observing a jump from 892 public companies in 3Q2023 to 685 public companies in 4Q2023. Additionally, a modest yet consistent increase on market capitalization has been noted, reaching $840 billion. With respect to capital structure, while the debt-to-equity ratio increased to 13.38%, a decrease in financial costs has been observed since the same quarter of last year, falling to 1.66% of interest expense, which might indicate a slightly less stable position for the industry

Public Market Dynamics: The industry at large, along with its most competitive companies, continues to exhibit a high sensitivity to the SPY, consistently trailing its performance. While the industry shows a performance of 6.16%, the top 20 companies have outperformed by only 0.67% above the SPY. Both the industry and the top 20 companies have sustained positive results since Q3 of 2022, in stark contrast to the SPY and the bottom 20 companies, which displayed a similar growth pace in the first quarter of this year but experienced a decline compared to the previous quarter.

Transaction Trends: In total, there were 56 transactions in this period. These transactions included 8 M&A deals, 31 private placements, and 15 public offers. Collectively, these 56 transactions amounted to a total value of $9.7 billion, indicating an increase of $3 billion compared to the previous quarter and replicating the upward trend observed since the last quarter of 2022. It's important to highlight the significant and positive shift in transaction values from the final quarter of 2021 through the close of 2022, demonstrating a consistent growth trajectory to date and nearly reclaiming high industry values.

Dispersion Insights: Dispersion Insights: North American and Asian markets have played a predominant role in contributing to overall industry revenue. The industry reflects a notable decrease in both presence and revenues. Although Asia exhibits a wider dispersion in the industry, US revenues are higher. Of the 8 M&A transactions in the quarter, a significant portion took place in Asia (3). M&A activity appears to be replicating patterns every two years, suggesting an increase in the number of deals for the next year. Lastly, in North America, the industry leader, a higher concentration of activity is observed in the public market compared to the private market.

Methodology

We screened CapitalIQ using its industry classification. Transactions were filtered by announced date within the last 3 years. Companies were filtered by having a public company type. The main industry selected was "Financials". The keywords "fin tech*", "fin-tech*", and "fintech" were used to screen the database. CapitalIQ industry "Financials" was used as category. Our sectors were defined by keywords from the CapitalIQ market intelligent level 2 primary industry classification.

THIS REPORT IS NOT TO BE USED OR CONSIDERED UNDER ANY CIRCUMSTANCE BY ANYONE AS INVESTMENT ADVICE

This research report is for informational and discussion purposes only. Information presented here is not investment advice of any kind to any person and does not constitute a recommendation as to the purchase or sale of any interests or as to any other course of action. General, financial, and statistical information concerning the details of this report and related industry are from sources Spaulding Financial believes to be reliable.

Spaulding Financial has accurately reflected such information in this research report; however, Spaulding Financial makes no representation as to the sources’ accuracy or completeness and has accepted this information without further verification. Neither all nor any part of the content of this report may be conveyed to the public through advertising, public relations, news, sales, mail, direct transmittal, or other media without the prior written consent of Spaulding Financial. Spaulding Financial ’s research is as of the date reported herein.

Spaulding Financial has no affiliation with any of the companies comprising the industry used as a basis for research in this report, nor does Spaulding Financial hold any investments in the companies listed herein. The content of this report may be used, in part, as a basis for any work that Spaulding Financial performs for you in the future at the sole discretion of Spaulding Financial. All data is from Capital IQ database.

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