Noah Kerner, CEO of Acorns.
Adam Jeffery | CNBC
Savings and investment app Acorns plans to go public by merging with a blank checking company.
The fintech start-up announced an agreement Thursday to combine with Pioneer Merger Corp., a publicly traded special-purpose acquisition company. The merger values Acorns at approximately $ 2.2 billion and is expected to close in the second half of this year.
When completed, Acorns will trade on the Nasdaq under the symbol OAKS, a nod to the company’s motto and an analogy of growing acorns into “mighty oaks.”
“Now was the time to go public to accelerate our growth and put the tools of responsible wealth creation in the hands of everyone as quickly as possible, when they need it most,” said Acorns CEO Noah Kerner. “We saw this as a throttle on that trip.”
Institutional investors Wellington Management, Greycroft, TPG’s global impact investing platform, and funds managed by BlackRock also committed to private placement as part of the announcement. Kerner and Pioneer’s sponsor each plan to contribute 10% of their personal property to Acorns as a gift to eligible Acorns customers.
The company, last valued at less than $ 1 billion, has attracted venture investments from companies including 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.
Irvine, California-based Acorns had been in the process of closing another round of private funding, Kerner said, but decided to go the recently popular SPAC route. He singled out John Christodoro, a PayPal board member and president of Pioneer Merger, as the right partner and one of the reasons Acorns overlooked a traditional IPO.
“Acorns is not only a category leader, but also a category creator. Its value proposition is based on inclusive and long-term financial well-being, ”Christodoro said in a statement. “With integrity at its core, the brand has an incredibly loyal following and market-leading retention rates.”
Acorns mobile app
Acorns most popular offerings allow customers to automatically invest the additional change from debit or credit card purchases into index funds. Since its launch in 2014, it has expanded to educational offerings, banking products, a debit card, and an automated retirement account service.
SPACs raise money through a shell company to buy an existing company. This has become a popular way for startups backed by later-stage companies to list on public markets quickly this year. However, new issues from SPACS declined in April, with only 10 new issues hitting the market compared to 109 the previous month, according to SPAC Research.
The Acorns list comes on the heels of record growth for investment apps during the pandemic. Part of that was thanks to the frenzy around GameStop and other “meme actions.” The trading mania has brought new attention to the markets and has drawn millions of first-time investors to platforms like Schwab, Robinhood, and Interactive Brokers.
But it also benefits passive investing applications. Wealthfront and Betterment posted their best quarters in history to start the year. Kerner said the first quarter was also Acorns’ best three-month record with subscribers doubling from the fourth quarter to 4 million. Start-up revenue is comprised of approximately 80% subscription fees and 20% transaction fees and brand associations.
When asked about the growing competition, Kerner said that “we run our own race.”
“We are focused on long-term financial wellness and helping clients stay committed to their long-term financial best interests,” he said. “Our vision is to build a financial wellness system that enables Americans to save and invest.”
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns, and CNBC has a content partnership with him.