Fintech Startup Acorns to Go Public in $2 Billion SPAC Deal

Acorns Grow Inc. plans to go public through a merger with a blank-check company in a deal that values the digital savings and investing app at about $2.2 billion.

The Irvine, Calif.-based financial-tech company said Thursday that it would combine with

Pioneer Merger Corp.

PACX 1.59%

, a special-purpose acquisition company affiliated with the hedge funds Falcon Edge Capital and Patriot Global Management. The plans were first reported by The Wall Street Journal. Pioneer jumped 3% in early trading.

Acorns automatically invests small contributions from users into baskets of stocks and bonds. It counts more than 4 million subscribers, most of whom pay $1 a month for the service, though Acorns also offers $3-a-month and $5-a-month options for additional features such as bank accounts or retirement plans. As of May, Acorns had $4.74 billion in assets under management, according to a recent regulatory filing.

As part of the transaction, Pioneer would contribute about $400 million in cash, with another $165 million coming from a related private placement involving funds managed by

BlackRock Inc.,

BLK -0.07%

Wellington Management Co. and other investors.

Special-purpose acquisition companies, or SPACs, like Pioneer are corporate shells that raise money from investors and go hunting for a private company interested in taking both the shell’s cash and its stock listing as an alternative to an initial public offering. SPACs have raised more than $100 billion in 2021, according to data provider SPAC Research. But share prices for many SPACs and the companies they have taken public have tumbled in recent weeks.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

SPACs have become a popular outlet for financial-tech startups, with banking startup Social Finance Inc., real-estate platform Better Holdco Inc. and trading app eToro Group Ltd. all agreeing to multibillion-dollar deals with SPACs in recent months.

The SPAC fad has also drawn the attention of regulators. The Securities and Exchange Commission is weighing whether to introduce new rules or guidance on SPACs with the aim of safeguarding individual investors, Chairman Gary Gensler told lawmakers this week.

Individual investors are expected to play a sizable role in Acorns’s merger with Pioneer. Acorns Chief Executive Noah Kerner said in an interview he planned to contribute 10% of his personal stake in the company to fund a program that gives shares to some Acorns customers. Pioneer’s sponsor plans to do the same.

Acorns automatically invests small contributions from users into baskets of stocks and bonds.



Photo:

Tiffany Hagler-Geard/Bloomberg News

Existing investors in Acorns include companies such as

PayPal Holdings Inc.

and Comcast Corp.’s NBCUniversal as well as celebrities like Jennifer Lopez and Dwayne “The Rock” Johnson.

Acorns projected that it would generate $126 million in revenue this year and $309 million in 2023, up from $71 million in 2020. The company also forecast that its user base would exceed 8 million subscribers by 2023.

Even hitting that target would make Acorns much smaller than fellow investing startup Robinhood Markets Inc., which had about 20 million users at the end of 2020, the Journal previously reported.

Unlike Robinhood, Acorns currently doesn’t allow users to buy or sell individual stocks. Mr. Kerner said Acorns guided users to build diversified holdings for the long term instead of making frequent trades, but the company is also planning to introduce an option for users to customize up to 10% of their portfolios with individual stocks of their choice.

“Acorns will be on the right side of history,” Mr. Kerner said. “We are not a grow-at-all-costs company.”

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com

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