FIS sells majority stake in Worldpay
FIS sells a majority stake in Worldpay to a private equity firm, Affirm stock declines on Piper Sandler’s downgrade, and crypto trading volumes drop to the lowest since 2019
Last Friday, The Financial Times broke the news that FIS is discussing a potential sale of its merchant acquiring business, Worldpay, with multiple private equity firms. Yesterday, FIS announced the sale of a majority stake in the business. Things escalated quickly as they say. More on that and other things Fintech:
FIS sells a majority stake in Worldpay to a private equity firm,
Affirm stock declines on Piper Sandler’s downgrade, and
Crypto trading volumes drop to the lowest since 2019
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FIS Sells Majority Stake in Worldpay
FIS (NYSE: FIS) has agreed to sell a majority stake in Worldpay to private equity firm GTCR. The transaction values Worldpay at $18.5 billion and represents a 9.8-times multiple on the expected fiscal 2023 adjusted EBITDA. FIS will retain a 45% ownership interest in a new joint venture and will use the upfront proceeds of approximately $11.7 billion to pay down its debt and return capital to shareholders to share buybacks. GTRC also agreed to invest up to $1.25 billion in additional equity capital into Worldpay to pursue inorganic growth prospects.
Worldpay is one the world’s largest merchant acquirers with $2 trillion in processed payments volume in 2022. The company came to life through a series of mergers and acquisitions. Thus, in 2010, Advent and Bain Capital acquired Worldpay from Royal Bank of Scotland for $3 billion as part of a financial crisis bailout. In 2015, the company was listed on the London Stock Exchange, and two years later, merged with US-based Vantiv, resulting in a combined entity valued at over $28 billion. GTRC competed with Advent in buying the company back from FIS, according to the Financial Times.
In 2019, FIS acquired Worldpay for more than $35 billion with the goal of creating a diversified financial technology company offering payment processing services to large banks and retailers. However, after pressure from the activist investors DE Shaw and Jana Partners, the company’s management initiated a review of its business structure and eventually agreed to spin off its merchant business as a separate publicly traded company. The company announced the decision in February this year, and planned to complete the spin-off “within a year.”
✔️ FIS Announces Agreement for GTCR to Acquire Majority Stake in Worldpay
✔️ Fidelity National Information Services to Sell Majority Stake in Worldpay
✔️ FIS Announces Plans to Spin Off Merchant Business
Affirm Stock Declines on Downgrade
Affirm (NASDAQ: AFRM) stock declined more than 10% yesterday after Piper Sandler downgraded the stock due to increasing competition and the impact of rising interest rates on the company’s profit margins. Analyst Kevin Barker downgraded the stock to “Underweight”, but maintained his $11 price target. Barker revised his projections for Affirm's revenue and earnings in 2023 and 2024, reflecting concerns about the company's dependence on loan sales and the negative impact of elevated interest rates on loan pricing. Affirm stock closed at $13.79 yesterday, well above the analyst’s price target, and is up 42.61% this year.
The analyst’s downgrade was also influenced by the intensifying competition in the Buy Now Pay Later market, with companies like PayPal and Apple entering the space and directly competing with Affirm. Barker highlighted the shift in Affirm's focus towards longer-duration products to differentiate itself from competitors who primarily target smaller order sizes with short-duration products. However, he expressed concerns that this strategic move could make Affirm more sensitive to credit and interest rate fluctuations, potentially leading to a lower valuation for the company's stock in the long run.
Crypto Trading Volumes Drop to Lowest Since 2019
Crypto trading volume on centralized exchanges experienced a significant drop in the second quarter, reaching its lowest point since the fourth quarter of 2019, according to research from CCData. Total spot trading volume for the quarter decreased by 40% to $1.7 trillion compared to the first quarter and dropped by 62% compared to the same period last year. Nevertheless, in June, spot trading volume increased 16.4% to $575 billion, reflecting improved sentiment following the filing of spot Bitcoin ETFs by the world's largest asset managers, BlackRock and Fidelity.
According to CCData’s research, Coinbase (NASDAQ: COIN) represented 61% of the Bitcoin trading volumes among the US-registered exchanges. However, based on the monthly trading volumes in June, the “US exchanges only represent 9.49% of the total Bitcoin trading volumes and Coinbase accounts for 5.83% of the global BTC trading volumes.” Binance.US saw its market share decline to 0.36%. As a reminder, The Securities and Exchange Commission sued both Coinbase and Binance in June for operating illegal exchanges and listing unregistered securities.
FIS (NYSE: FIS) completed the acquisition of Worldpay on July 31, 2019. Since then its stock declined 52.59%, while Nasdaq Composite Index advanced 68.70%. To be fair, FIS’s closest competitors, Fiserv (NYSE: FI) and Global Payments (NYSE: GPN) also underperformed the index.
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Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.