Foley Trasimene Acquisition Is a Worthy Blank-Check Play

Investors’ interest in Foley Trasimene Acquisition II Corp. (NYSE:BFT) stock is certainly warranted. The firm is a blank-check company which, on Dec. 7, announced that it had found a suitable merger partner in U.K. fintech firm Paysafe.

Paysafe Card Iphone Display with Keyboard Mouse and Red Pen BFT stock

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SPACs (Special Purpose Acquisition Companies) go by a few pseudonyms: blank-check company and shell company are the two that immediately pop to mind. By whatever name, this particular vehicle has become a very popular means by which to raise money for  companies. Long story short, 2020 was the busiest year on record for SPAC activity.

Paysafe is notable in that, unlike many SPAC merger partners, it isn’t in the electric-vehicle space. Frankly. it’s refreshing to be writing about a blank-check target that’s not in the EV space.

SPACs have no operations. That means potential investors cannot access significant financial records in order to conduct due diligence on them. Instead, investors must rely on the reputation of the management teams running them.

Foley Trasimene Acquisition II Corp. is anchored by prominent businessman Bill Foley. Foley has lead several businesses to prominence, so perhaps BFT stock could be next.

Foley’s Record

It’s tempting to simply look at Foley Trasimene Acquisition II Corp and assume that it will be as successful as a number of other of Bill Foley’s companies have been. Based on that thought process, purchasing BFT stock simply makes sense.

After all, Bill Foley is the Chairman of Fidelity National Financial (NYSE:FNF), Black Knight (NYSE:BKI), and Cannae Holdings (NYSE:CNNE). That’s in addition to his position as founder of Trasimene Acquisition II Corp. The collective value of of those companies approaches $30 billion.

And one of Foley’s SPACs recently brought Alight — which develops “human capital, cloud-based” solutions —  public via a SPAC IPO, resulting in sizable price appreciation. Bill Foley’s record does seem to speak for itself.

But those who invest in SPACs also need to consider their targets. This aspect of any blank-check merger is at least as important as the SPAC.

Paysafe

Paysafe is certainly different from most SPAC targets that have nabbed significant headlines of late. In this case different is good. That’s because many blank-check companies have tended to team with target firms which have weak financial results.

Electric-vehicle companies without revenues have been a popular target because of the extent to which the industry is growing. Most of the SPAC funding has then been used to launch or expand manufacturing operations.

Paysafe represents a refreshing change from that perspective.

Paysafe generates a lot of revenue. It recorded sales of $1.39 billion in 2019. The company expects its revenue to grow at a compound annual growth rate of 11% through 2023. That would bring its revenues to $1.88 billion in 2023.

Staying the Course

Paysafe believes that its sales declined 1%  in 2020 to $1.38 billion. But the company is becoming more operationally efficient in these leaner times.

Foley Trasimene is seeking to boost Paysafe, a proven business, with a merger.

The Verdict on BFT Stock

Foley Trasimene  looks attractive at this point. I’m a big proponent of judging businesses by their top and bottom lines.

We know that Paysafe already has a strong revenue stream. The company also anticipates generating $420 million of EBITDA in 2020. To me, Foley Trasimene represents what investors should seek in a blank-check company. All of this is as important as the winning team behind the SPAC.

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


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