Acorns Grow Inc., a robo-adviser backed by celebrities like Jennifer Lopez and asset management giant BlackRock, announced plans Thursday to go public via a merger with a blank-check firm set to value the combined company at $2.2 billion.
Acorns is slated to merge with publicly traded special purpose acquisition company Pioneer Merger Corp. The startup will trade on the Nasdaq under the symbol "OAKS" after the deal closes, which is expected to happen in the second half of 2021.
After the deal is finalized, the company will operate as Acorns Holdings, Inc. and will continue to be led by CEO Noah Kerner, who plans to contribute 10% of his personal ownership in Acorns to fund a program giving shares to eligible customers.
“We intend to introduce our share rewards program that will allow eligible customers to own a piece of the company and an even greater piece as they invite others to start the path toward financial wellness,” Kerner said in a statement.
Launched at the end of 2014, Acorns is a subscription-based automated investing and banking app with more than 4 million users to date, which is expected to grow to 10 million by 2025, according to the announcement. Average age of an Acorn user is 34 years old, with 60% of users being first-time investors.
The Acorns deal comes during a booming market for robo-advisers. However, the Irvine, California-based company’s growth trajectory has not been as rapid as some of its competitors. Acorns grew its assets under management from approximately $3 billion in 2020 to $4.7 billion, according to the fintech’s latest Form ADV filed May 19.
By comparison Betterment grew its assets under management from $18 billion in 2020 to $29 billion. Wealthfront, too, increased its AUM to $25 billion, up from $15.85 billion reported in September 2020, and Vanguard added $70 billion in robo-assets from the end of 2019 through the first quarter of 2021.
"While Acorns trails other investing apps like Betterment and Wealthfront in terms of assets under management, it is far ahead in the number of users," said Backend Benchmarking's manager of research and analytics David Goldstone. "Betterment and Wealthfront have yet to reach 1 million investing clients while Acorns counts its users in the millions."
Meanwhile, the average account at Acorns is small, but its subscription model helps them generate revenue regardless of account size, Goldstone said. "Acorns’ success stems from its focus on simplicity and bringing the hurdles to becoming a first-time investor very low."
SPAC deals have also been dominating the market this year as a convenient shortcut that allows fintechs to go public without the hassles involved in pursuing an initial public offering. As a result, the SPAC frenzy has been pouring into the wealth management sector as billionaires and innovators funnel cash into wealthtech and elevate more firms to go public.
In January, fellow robo-adviser Social Finance Inc. agreed to be taken public by a blank-check company backed by billionaire venture capital investor and Social Capital CEO Chamath Palihapitiya in a deal that values the upstart at around $8.7 billion.
Commission-free trading and social networking app eToro announced plans in March to go public via a SPAC deal set to value the combined company at about $10.4 billion. Digital custodian Apex Clearing is also going public via a blank-check merger with Northern Star Investment Corp. II, in a deal that put the combined company’s value at $4.7 billion.
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