Despite the weariness that at least some of you must feel toward special purpose acquisition companies (SPACs), there is a case to be made for Foley Trasimene Acquisition Corp. II (NYSE:BFT). Indeed, several of my InvestorPlace colleagues seem optimistic regarding the potential for BFT stock. I’m going to give you both sides of the argument, but we’ll start with the sunny side up.
First and foremost, SPACs basically live or die based on their sponsors. While I don’t want to dive too much into the mechanics of blank check companies, the main point is that SPACs usually have two years to secure a deal.
Whether that deal is a good one or not is out of shareholders’ hands. Instead, they’re hoping that the sponsor will act in good faith to get something substantive to the table.
As our own Muslim Farooque pointed out, those who gambled on BFT stock are in good hands. Bill Foley is quarterbacking the SPAC that bears his surname. As Farooque points out, Foley has “been one of the most successful dealmakers in the investing world.”
Sure enough, Foley Trasimene Acquisition Corp. II announced a merger with fintech firm Paysafe, which specializes in digital payments processing and services. Given that this sector is soaring, it’s no wonder BFT stock attracted both long-term investors and speculators alike.
Contributor Chris MacDonald put it this way:
Paysafe’s business model revolves around a range of online payment services. These range from e-commerce processing solutions to B2C and B2B online payment networks, digital wallets and POS options. The company is exploring various attractive growth segments in gaming, and has a ton of potential verticals available to grow this business exponentially over time.
Additionally, Paysafe is a global player, with impressive penetration in key markets in North America and Europe.
With a viable business and a sponsor known for bringing value to companies, BFT stock seems like a no-brainer. But that’s also where some concerns arise.
Read the Fine Print Before Wagering on BFT Stock
I don’t want to give the impression that every one of my colleagues is bullish on BFT stock because that’s not the case. One of the most colorful of color commentators, Lou Carlozo, explored the other end of the spectrum.
First, Carlozo rightly brought to our attention that SPACs aren’t necessarily investor-friendly deals. The best example of course is a development that I myself have mentioned for other articles – the Virgin Galactic (NYSE:SPCE) fiasco.
As you’ve probably heard, regulatory filings revealed that Chamath Palihapitiya, who helped fund Virgin Galactic, sold his entire personal stake in SPCE. It’s not great optics obviously, but it helps to shine the light that investors need to look out for number one because SPAC sponsors are doing the same.
To be 100% clear, this is not meant to impugn BFT stock and Bill Foley. We must judge each company and executive on their own merits and not assume guilt by association. However, Carlozo brings up a valid point – you’ve got to be careful about SPACs because they’re not quite structured favorably for retail investors.
Another point I think is worth mentioning is the assumption of viability for Paysafe. Carlozo also addressed this, noting that the payment services arena is hyper-competitive. Plus, it’s a sector that’s always evolving, which means that decades of experience could be rendered moot.
Great argument. I on the other hand will address the lower-hanging fruit and that is the consumer economy. As much as the headline numbers seem to suggest the economy is improving, I’m wondering where this money is coming from.
FINRA may have provided a clue in that in terms of the stock market, what we see is maybe not what is. Equity trading on margin, which was already at a record high in January of this year, ticked higher by 1.9% in February.
If people are speculating like crazy in stocks – and it seems this is an international phenomenon – they may not have funds for avenues that Paysafe covers, such as iGaming.
A Not Comforting Technical View
Interestingly, following its bout with volatility, BFT stock has charged back up but still is just below its 50-day moving average. To me, it’s worrisome that such a hyped-up equity unit is demonstrating weakness in the technical charts.
Of course, that’s not a guarantee of anything because anything can happen from here on out. I think it may be worthwhile for conservative investors, to wait this one out.
I’m not suggesting that Paysafe is a bad company. However, it may be at a bad price considering the less-than-reassuring fundamental and technical angles.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.