Payment technology company Marqeta has filed for an initial public offering (IPO), as its valuation topped $16 billion in the private markets.
The IPO filing comes when there is a surge in demand for online payments and digital financial services.
Let’s look at the details in Marqeta’s IPO filing.
Background on Marqeta
Marqeta is a payment technology company whose platform provides end-to-end financial and identity authentication for payment processing services. The company is based in Oakland, California, with offices in Europe and a network of strategic partners worldwide.
Founded in 2010, Marqeta has become the leading provider of open APIs for card issuing and acquiring that are tailored to each user’s unique business needs. The Marqeta platform provides comprehensive solutions for transactions within all major payment systems, including Visa, Mastercard, American Express, Discover, Amex Express Checkout and others.
In addition to providing merchants with smart cards for secure transactions, the company offers advanced features such as tokenization and contactless payments. Marqeta has acquired multiple startups over the past decade to accelerate growth and strengthen its product portfolio.
These moves have led to an impressive track record of success, empowering millions of users worldwide to access their funds quickly and securely while providing unparalleled convenience and control over their payments experiences. Expansion into international markets further positions Marqeta as a leader in payments agility.
The company is now poised to further capitalize on its strong market position and expertise with its planned Initial Public Offering (IPO). Led by experienced industry professionals such as CEO Jason Gardner—who co-founded the company—and CFO Nick Goldstrum—who joined Marqeta in 2020—Marqeta’s IPO filing seeks to raise $967 million as it seeks a valuation topping $16 billion on private markets. This move aims to catapult Marqeta into even higher levels of success within the fast growing fintech market.
Overview of Marqeta’s IPO filing
Marqeta Inc., a leading payment technology company, filed for its initial public offering (IPO) on July 1st. Marqeta operates primarily in the United States, providing payments and payment-related services to well-known merchants, banks, issuers and other organizations. The Oakland-based company is estimated to be worth $16 billion in the private market.
Marqeta’s filing with the U.S. Securities and Exchange Commission is part of its plans to become a publicly listed company and raise capital for future growth initiatives and investments. The company has informed that it will offer 14 million shares at an expected price of $20-$22 during its IPO, which could potentially raise about $312 million if priced at the high end of the range.
The firm has not yet specified when it plans to list on Nasdaq or which ticker symbol it will use for trading but market watchers say that could come within weeks from now if all goes as planned. Investment firms Goldman Sachs & Co LLC and J.P. Morgan Securities LLC are among several underwriters supporting the offering. Some others are Barclays Capital Inc., Jefferies LLC, KeyBanc Capital Markets, Mizuho Securities USA LLC, Stifel Nicolaus & Company Incorporated, William Blair & Company LLP and Needham & Company LLC.
Marqeta intends to use the proceeds of its IPO towards investing in new innovative products such as open banking platform Luscio Technologies; expanding into international markets; funding growth initiatives; debt repayment; working capital changes and general corporate purposes such as acquisitions or furthering operating capabilities -all these activities mentioned above are key strategies used by tech companies looking at expansion today or developing new products or services to stay ahead of competition.
Payment tech company Marqeta files for IPO as value tops $16 billion on private markets
Payment tech company Marqeta recently filed for its much-anticipated IPO, with the company being valued at more than $16 billion on private markets.
As part of the filing, Marqeta disclosed its financials, which included its revenue and loss for the past three fiscal years. Let’s look at Marqeta’s finances and discuss what we can learn from them.
Revenue growth
Payment technology company Marqeta is kicking off its initial public offering (IPO) with a bang: its filing revealed that the company’s gross transaction volume has seen sustained, strong growth. In 2020, the company-recorded $20.6 billion in total volume of payments, an increase of more than 78% over 2019’s figure of about $11.6 billion.
Marqeta has also seen increasingly large deal sizes since 2017 when it started processing payments. For example, in 2020, Marqeta processed an estimated 5 million transactions across millions of accounts worth an average transaction value of nearly $3,166 compared to around 1 million transactions across hundreds of thousands of accounts worth an average transaction value of just over $1,000 in 2017. This indicates the increasing maturity for Marqeta’s sizable customer base and suggests that more embedded payment and financial services are being used as customers become more comfortable with the digital payment solutions {Marqeta.
Profitability
According to Marqeta’s filing with the US Securities and Exchange Commission, the payment tech company posted a net loss of $127.8 million in 2020 compared with a net loss of $53.3 million in 2019. In addition, Marqeta reported total revenue of $106.6 million for 2020 which was an increase of 85% from the prior year due primarily to increased transaction and customer base growth across our various services.
However, when excluding stock compensation expenses, operating expenses as well as depreciation, amortization, (EBITDA) showed an improvement from ($58.9M) in 2019 to an EBITDA profit of $4M in 2020. Despite posting a net loss on traditional GAAP accounting standards Marqeta’s payment solutions have become increasingly profitable indicating that the company is more resilient than might appear initially.
Cash flow
In its IPO filing, payment tech company Marqeta provides key financial information regarding its cash flows. The company reported $187 million of net cash flow from operations in 2020, versus 2018’s net cash provided by operating activities of $95 million. In addition, over the same two-year period, adjusted free cash flow increased substantially from a loss of $11 million to a profit of $72 million.
Marqeta’s primary source of cash inflows comes from payments processing and partnership fees derived from the card products enabled through its technology platform. Cash outflows are primarily driven by investments in personnel costs, technology development expenses and marketing campaigns. In 2020, these amounted to about $336 million of net cash used in operating activities compared to the 2018 figure of about $104 million.
In addition, capital expenditures totaled nearly $43 million in 2020 compared to just under $6 million in 2018, reflecting increased investments in support infrastructure and payment terminals.
Marqeta has seen improved net and adjusted free cash flows as it focuses on expansion and growth opportunities across the payments industry.
Marqeta’s Business Model
Payment technology company Marqeta has filed for an initial public offering (IPO) with an estimated market value of over $16 billion. This IPO filing is a big step in Marqeta’s growth story, and allows us to understand its business model in greater detail.
Let’s examine the technology company’s business model and its impact on the payments industry.
Products and services
Payment tech company Marqeta offers an open API platform (PaaS) service that enables companies to develop and launch payment products quickly and scale easily. This includes card issuing, tokenization, merchant routing, processing information capture, customer onboarding and transaction analytics.
The Marqeta platform offers consumer-focused products such as consumer credit cards with rewards points programs and business-focused products used in health care, logistics, retail and payments services for merchants or other financial services companies.
Marqeta’s customers are established financial institutions and fintech companies such as Stripe, Square or Expedia. Additionally Marqeta provides software development services to help customers build customized products on their platform. These include best practices consulting linked to product and feature design, compliance & security assessment, testing frameworks & customer assurance engineering, custom integrations and support tools & team augmentation.
Overall their business model is focused on using innovative technology driven solutions to create a streamlined card issuing process that enables customers to quickly launch payment products globally while keeping compliance costs low.
Target markets
Payment tech company Marqeta has identified several global markets that could benefit from its payment solutions. The company primarily focuses on companies offering “modern card issuing,” as well as global brands and financial institutions. These customers can use Marqeta’s services to build their payment cards, launch loyalty programs, or develop their digital payment platforms tailored to their customer needs.
The markets targeted by Marqeta include the consumer payments space, the “gig economy” (which includes companies such as Uber and Lyft), point-of-sale (POS) payments, corporate cards and commercial payments, machine learning-enabled fraud prevention services, and business intelligence analytics. For each target market segment, Marqeta provides various solutions designed to meet the customer’s specific needs.
Marqeta’s target markets are split into three main categories—financial institutions, global brands and modern card issuers. Financial institutions offer traditional banking products such as deposits and loans; global brands seek to do business worldwide; modern card issuers develop innovative solutions to enable their customers to make digital payments quickly and securely at brick-and-mortar stores or online retailers. In each area, Marqeta approaches customers with a suite of services that allow them to customize their offering for any customer experience possible in today’s highly competitive digital economy.
Competitive landscape
The competitive landscape in the payment technology sector is highly dynamic and rapidly evolving. In addition to Marqeta, many companies have emerged, providing services from payment processing and fraud prevention to point-of-sale systems, loyalty program management, and more.
In its S-1 filing for its initial public offering (IPO) on the New York Stock Exchange (NYSE), Marqeta listed several competitors that it believes are well positioned in the industry: Visa Inc., Mastercard Inc., PayPal Holdings Inc., Stripe, Square Inc., Adyen NV, Worldpay Inc., TSYS, Fiserv Inc., Global Payments Inc., Fidelity National Information Services Inc. (FIS), Ingenico Group SA and Bluefin Payment Systems LLC.
Many companies have significant resources to invest in strategic partnerships and new technologies. Additionally, many have international operations with access to large customer bases outside the United States that Marqeta does not currently offer. Furthermore, due to the fragmented marketplace for payment processing software providers and technology platforms, further consolidation in this sector may increase competition for Marqeta’s products and services.
Risks Factors
Payment technology company Marqeta has recently filed for its initial public offering (IPO) as its value topped $16 billion mark in private markets. While its IPO filing can provide the company with access to the much needed public capital, certain risks are associated with going public.
This article will explore the various risk factors associated with Marqeta’s IPO filing.
Regulatory risks
Given the payments industry’s regulatory complexity, Marqeta is particularly vulnerable to changes in existing regulation and potential costs associated with complying with future regulations. As a participant and provider of payment card network services and through its products, Marqeta may be subject to substantial regulation, including data privacy, anti-terrorism, anti-money laundering laws, consumer protection laws, government-appropriated funds operations and permissible purposes for providing program management services.
Regulatory non-compliance or the costs of complying with new or changing regulations could harm Marqeta’s business. For example, changes in laws hurting their products or operations may increase program costs (including default fees) for Marqeta’s customers or require additional resources for compliance that could lead to operating cost increases.
Additionally, under certain circumstances, a payment card network may exclude certain types of transactions from using its cards and networks if Marqeta cannot prove compliance with applicable rules and regulations. The most recent example is the implementation of the 15 U.S.C Section 1681 et seq., commonly referred to as the Equal Credit Opportunity Act (ECOA). Moreover, providers of payment card network services are subject to penalties and fines imposed if they fail to comply with applicable law.
Financial risks
Financial risks can potentially impact Marqeta’s ability to grow and remain profitable over time. Some of the primary financial risks to Marqeta include:
-Fluctuations in financial results: The payments industry is inherently volatile, with revenues and profits subject to rapid fluctuations due to changes in market demand, economic cycles, client preferences, industry competition and technology advancements.
-Changes in capital requirements: Marqeta must continuously adjust its capital reserves to cover its liabilities as a growing company. Changes in regulatory capital requirements or investment returns could harm the company’s profitability and financial position.
-Cost of funds: Marqeta borrows money from various sources at various interest rates subject to market conditions, availability of debt financing on acceptable terms and other factors. If these costs rise faster than its revenue growth, this would adversely affect margins.
-Variations in technologies or technological standards: New technologies may displace existing payment technologies or disrupt usage patterns leading to decreased revenues or additional investments that could increase operating costs or hamper growth prospects.
Technology risks
Technology risks represent the potential for rapid technological changes to make Marqeta’s products and services less commercially attractive or obsolete. Our ability to adapt to technological changes, including development of new platforms, technologies and processes; introduction of new products and services; development of security measures for protection against cyber-attacks; maintenance of computer systems and databases, may be hindered by rapid technological developments. Moreover, our offerings may not be compliant with any relevant standard or regulations related to the securities law or otherwise following important IPOs.
Future products and services we develop may have deficiencies, bugs, or other problems that could result in unanticipated costs, liabilities, or reputational damage due to failure or malfunctions. Such disruption can also impede our ability to attract customers and increase customer satisfaction, which could adversely affect our results of operations.
Conclusion
Marqeta, Inc., the payment technology company, has formally filed for an initial public offering (IPO). The U.S. Securities and Exchange Commission (SEC) filing indicates that the company is likely to become publicly traded sometime in 2021.
The Marqeta IPO filing details the company’s revenue since inception in 2010 and how it has grown to $105 million in 2020 fiscal year revenue with net losses at $98 million in 2020. The March 2021 private market valuation of Marqeta was around $16 billion with marcus venture capital agents owning 40% of pre-IPO shares and other venture capital entities taking large stakes in Marqeta’s growth potential.
The filing also allows investors to decide if they wish to invest or not as they are prompted to read through various risks such as operating previous losses, challenges that may arise from increasing competition and collaborating relationships that may involve larger players such as large banks or major payment networks like Visa as a few key points to consider during investing in Marqeta’s IPO event.
Given that payments are increasingly becoming digital due to trends such as ecommerce blurring distinctions between online and offline retail, and leveraging technologies like AI for increased operational efficiency; Marqeta stands backed by technology giants like Google Payments and Citigroup which have investments dedicated towards advancing payments technology solutions via startups worldwide. However, with a valuation well above its competitors, based on its prospective growth opportunities; whether this momentum carries over post-IPO remains uncertain until existing investors sell their shares on Nasdaq later this year.
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