Visa Inc. (V - Free Report) is set to take over U.S.-based fintech company Plaid in a deal worth $5.3 billion — almost double the start-up’s last private valuation. Plaid raised $250 million in a 2018 Series C funding round that set its valuation at $2.7 billion. The Visa-Plaid deal is expected to be finalized in the next three to six months, pending regulatory approval.
“Plaid’s API software lets start-ups connect to users’ bank accounts.” Plaid has been working with Venmo, a mobile payment service owned by PayPal (PYPL - Free Report) , mobile investing app Robinhood and cryptocurrency exchanges Coinbase and Gemini, per CNBC.
Plaid’s customer base doubled from 2017 to 2018 and has expanded to the U.K. and Canada, per CNBC. As of December 2019, Plaid said 25% people in the United States with bank accounts have connected to the fintech company through an app.
The start-up acquired Quovo two years ago to expand its presence beyond banking, and step into broader financial services and investments. The line of business makes it clear why Visa, which operates retail electronic payments networkglobally,chose Plaid as a compelling acquisition candidate.
Visa CEO said Plaid has been seeing a CAGR of about 100% since 2015. The deal would prepare Visa for the technological disruption in the next decade. Visa also expects the deal to inject as much as 100 basis points to net revenues by 2021.
Visa’s shares 0.81% on Jan 13 and also added gains after hours. However, Visa has a Zacks Rank #3 (Hold) and an ESP of -1.08%. The negative ESP lowers chances of a beat in the to-be-reported earnings, slated to be released on Jan 29.
Investors, who want to bet on the Visa-Plaid deal but are having second thoughts due to negative ESP, may play the below-mentioned Visa-heavy ETFs. A basket approach always minimizes stock-specific risks.
iShares U.S. Financial Services ETF (IYG - Free Report)
Visa takes the second spot in the fund with about 9.79%. The fund has a Zacks Rank #3 (read: Should You Bet on Bank ETFs Before Earnings Release?).
ETFMG Prime Mobile Payments ETF (IPAY - Free Report)
Visa takes the fourth position in the fund with about 6.05% exposure (read: ETFs to Invest in Mobile Payments and Drone Economy).
iShares U.S. Financials ETF (IYF - Free Report)
The Zacks Rank #3 fund invests about 5.64% in the stock, taking the third position.
SPDR SSGA Gender Diversity Index ETF (SHE - Free Report)
Visa takes the top spot in the fund with about 5.28% focus.
Technology Select Sector SPDR Fund (XLK - Free Report)
The Zacks Rank #1 (Strong Buy) fund puts 5.19% in Visa (read: Apple at All-Time High, Poised for an Upbeat Q1: ETFs to Benefit).
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
The fund invests about 5.14% in the stock (read: Should You Invest in Factor & Smart Beta ETFs?).
iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report)
Visa takes the second spot in the fund, with about 5.14% exposure (read: Bet on These Momentum ETFs to Gain From Wall Street's Rally).
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