Foley Trasimene Acquisition Corp. II Has Plenty Of Upside Remaining

2020 was the busiest year for blank-check companies. Special purpose acquisition companies (SPAC) raised close to $80 billion last year, crushing the $13.6 billion they raised in 2019. Most of these companies had inflated valuations, which came crashing down once they merged with their targets. However, Foley Trasimene Acquisition Corp. II (NYSE:BFT), led by business tycoon Bill Foley appears to be an exception to the case. BFT stock is trading cheaply considering its merger target’s potential and the impeccable track record of its management team.

An image of wooden blocks that say SPAC over a series of one dollar bills.
Source: Dmitry Demidovich/ShutterStock.com

Bill Foley has been one of the most successful dealmakers in the investing world. He has been involved in the acquisition and spinoff of more than 100 companies. His management team of financial experts has helped him cut successful deals for the past 30 years or so. Foley is currently the chairman of Cannae Holdings (NYSE:CNNE), Fidelity National Financial (NYSE:FNF), and Black Knight (NYSE:BKI). To add to that, you have Trasimene Acquisition II Corp. The combined value of these companies exceeds $25 billion. Therefore, its merger partner in fintech Paysafe is in able hands.

Paysafe’s Potential

Back in December last year, BFT stock announced its merger with UK-based online payments company Paysafe. The combined entity will list under the ticker PSFE, with an estimated enterprise value of $9 billion. The deal is expected to wrap up in the first half of 2021.

Paysafe operates two legacy assets called Neteller and Skrill. These are online payment networks that operate as digital wallets offering POS and eCommerce processing solutions. They currently operate in more than 100 markets, which is a number that has continued since their inception. The company’s competitive advantage lies in iGaming, a sector that has craved for such a service. PayPal has shied away from online gambling, which created the void for Paysafe to establish its dominance.  Its iGaming network is utilized in more than 50 markets.

Paysafe’s merger with BFT stock will accelerate organic sales growth and expand its iGaming presence. Moreover, it estimates it could have $103 billion in transactions this year. With a 1.5% cut, it could be looking at $1.5 billion in revenues with a gross profit of $963 million. Moreover, it believes that it could have an EBITA margin in excess of 30% with organic revenue growth of 11% between 2020 and 2025.

Price Performance

Price performance BFT stock
Source: Chart courtesy of StockRover.com

BFT stock’s initial public offering was back in August last year, and its shares stayed below $10 for a fair bit of time. Typically, we have seen that SPAC stock prices rocket to the moon, but this wasn’t the case with BFT. We can see from the chart above that it took off around December. This is the time when it announced its merger with Paysafe.

The bulls had their way with BFT stock and pushed its price above $19 by late January. The stock is currently trading over $14 and has lost over 13% of its value this month. It has only grown a modest 6% in the past three months, which is atypical to other SPAC stocks.

Bottomline on BFT Stock

BFT stock remains quiet before the completion of its merger with Paysafe. Considering the massive potential of Paysafe and the track record of Bill Foley, it appears that BFT stock has a significant upside. Paysafe has a bright future ahead, and with regulatory tailwinds it is likely to grow at a healthy pace going forward. Additionally, its growth catalysts aren’t priced-in yet, making it an attractive investment to grab at a discount.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article 


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