IPO Radar - Stash
Transforming Personal Finance for the Underbanked
Hey Everyone, and welcome back to the IPO Radar, it’s been a while!
For some reason, Dez hasn’t gotten sick and tired of me yet, so we’ll keep the good times rolling with another TY-PO Radar this month. For those of you who missed out on last month’s IPO Radar, we put together a piece on the IPO of Squarespace (Nasdaq: SQSP), a leader in web hosting and ecommerce tools for entrepreneurs looking to build a digital presence. As the coveted jersey patch sponsor for my New York Knicks, SQSP’s public listing held as high of expectations going into their market debut as the Knicks had going into this playoff season (for those of you who aren’t as much of basketball fanatics, this was the first time the Knicks haven’t made the playoffs in A WHILE). Unfortunately, when IPO day hit for SQSP on May 19, 2021, SQSP’s debut flopped just as hard as my Knicks did during these playoffs. SQSP opened up at $50 a share on IPO day, only to slump almost 14% to $43.65 on the first day of trading. However, since their fateful debut, SQSP has ROARED back in style, posting a steaming 46% return since its May 19th close, and SQSP is currently priced at $63.52 as of June 21st, 2021. I think it goes without saying that CEO Anthony Casalena, now worth over $2 BILLION, will be covering the check for a lot of chicken parm and spaghetti dinners to celebrate his successes.
Anyways, before start I to get hungry writing more about billionaire’s Italian dinners, let’s move onto the next company. Today’s IPO Radar will be on Stash, which is a digital financial technology platform focused on various aspects of personal finance for younger, less-wealthy Americans.
Stash was founded in 2015 by CEO Brandon Krieg, David Ronick, and Ed Robinson. Through its mobile and web platform, users can participate in a wide variety of personal finance activities for a flat and modest monthly subscription fee. Such services offered include individual stock investing, ETF trading, account banking, credit cards and retirement planning. It even offers a first-of-its-kind “Stock-Back-Card”, where users can have points earned from credit card purchases automatically converted to your favorite stocks! Furthermore, through Stash’s platform Stash Learn, users can learn about basic financial wellness habits to bolster their understanding of the personal finance world. Such courses range from the more traditional information on how to do your taxes, to the more topsy turvy world of how to dissect the lingo on Wall Street Bets. Needless to say, Stash has got it GOING ON, and everyone from inquisitive young-ins to angry Redditors are jumping on the Stash train to take this platform to the 🚀🚀🚀.
These three fire subscription plans give users the flexibility to dive into the world of personal finance:
- Stash Beginner ($1 / month): Full service of investing, banking (including the ~Stock-Back-Card~) and life insurance. It also includes savings strategies for beginners and portfolio recommendations.
- Stash Growth ($3 / month): All the sweet perks of Stash Beginner, with the added benefit of allowing Stash to manage your investments, retirement planning, and tax benefits through a robo-advisor. In short, all you have to do is give Stash your cash, and they’ll do the ~diamond hands~ investing for you.
- Stash+ ($9 / month): Your super comprehensive offerings from Stash Growth, BUT with the added benefit of kids’ investment portfolios, higher credit card benefits, and premium research from the Stash team
Stash is looking to become the one stop shop for investors and savers everywhere, and their success to date has shown. On February 3rd, 2021, they raised a whopping $130 million at a ~$1.4 BILLION valuation from top notch investors such as Eldridge Industries, Entrée Capital and T. Rowe Price. Finally, on May 27th, 2021, Stash announced that they are “weighing their options” towards a public market debut soon.
What Does “Weighing Their Options” Even Mean?
When a company says they’re “weighing their options” on a public debut, there’s really only two routes they can pursue to go public. The first is a Traditional IPO, where a company will list shares on a stock exchange either through an investment bank or a direct listing on their IPO date. Investment bankers will often assist the company in setting a price to go public at, which is an indication of the value of the business when they start trading publicly for the first time.
The second public route, and the one that has been catching headlines these days is through a SPAC (Special Purpose Acquisition Corp) Merger. Outside of the Gamestop / AMC trading circus that was souped up by a mob of angry Redditors, ~SPAC Madness~ as I like to call it is one of the most widely spoken about new crazes in financial markets. Essentially, a SPAC will IPO their business as a “blank-check company” who will then choose a business to take public through their vehicle, also known as a SPAC merger. As of June 21st, 2021, there at 315 SPACs actively looking for companies to merge with, making this route more than viable for companies that are seeking entry to the public markets.
SPAC mergers, despite being used often in funny finance memes, do have discernable pros and cons compared to a typical IPO. Unfortunately, we don’t have enough time to cover this in depth, but for those interested in learning more, the article here is a helpful resource.
Stash & The Fintech Industry by the Numbers
Anyways, back to Stash and the FinTech industry more broadly. Here are some of the key metrics of the business and the industry it resides:
- Stash currently has 5 million customers, up from 1 million in 2017
- Stash currently has $2.5 billion in assets under management (AUM)
- Account openings for Stash were up over 100% YoY in 2020
- In Q1 2021, the FinTech industry exploded with $22.8 billion raised by private companies over the course of 614 fundraising rounds
- In Q1 2021, the Wealth Management subvertical of FinTech raised $5.4 billion in private funding, 5x the amount in Q1 2020. The number of deals in Wealth Management also rose by 27% QoQ
The Big Picture: The FinTech Revolution and Democratization of Personal Finance
Stash and the platform it developed leading up to its public debut is part of a larger trend which is bringing personal finance away from traditional wealth management tools such as banks, and towards new creative digital start-ups. Twenty years ago, traditional tools of wealth management were widely inaccessible for lower- and middle-income families, and as a result a wealthier family had more financial acumen and resources to continue to grow their wealth. Traditional financial institutions (think JP Morgan and Goldman Sachs) would manage the wealth of high-net-worth clients, leaving lower income individuals to fend for themselves to build their wealth and build their knowledge of personal finance. Nowadays, the advent of the internet and the scalability of apps through smartphones have allowed lower income families greater access to personal finance tools and have empowered them to start using digital applications to save money faster and more efficiently. Personal finance is become accessible to more people and expanding rapidly across the globe, allowing everyone to learn the tips and tricks of wealth creation historically privy to the upper class. The fact of the matter is, new personal finance apps are giving power to the people, and they’re here to STAY.
Stash is an amazing tool that’s designed to empower younger, and less wealthy cohorts of individuals to take control of their earnings and build financial freedom. However, every investment opportunity comes with its potential threats, and one of the major threats to Stash’s growth is the VAST sea of competition it will face. Other neobanks and personal finance apps such as Varo, Chime, and Wealthfront have stormed the Fintech scene with singular quests to become the head honchos in digital wealth management. Therefore, as an investor, one must be VERY careful in figuring out which competitor really has the secret sauce to continue adding users to its platform and become the alpha dog in this subsector of Fintech. For now, though, Stash has proven it can run with the best of them given its explosive historical growth, and we’re excited to see where their quest for Fintech dominance will take them.
Thank you for slogging through another one of my TY-PO articles, and another HUGE thanks to Dez for letting me continue rant about cool companies. – TT
Stash is an all-in-one personal finance platform that helps underbanked families learn to invest, save, and plan for retirement. The digital wealth management space is highly competitive, so it’s important to absorb all the facts about each company to see which one has the secret sauce to be successful down the road.