RE:PAYSAFE vs PAYPALUPDATE FROM YAHOO FINANCE :
BFT/Payafe merger DD :
• Proprietary scalable electronic payment platform used by Draftkings, Roblox, Youtube, Coinbase, Visa, Fortnight, Amazon, ApplePay, Twitch, Microsoft, Xbox, Spotify, Amelco, William Hill, Golden Nugget, Ceasar’s Entertainment, Betfair, PayLease, Vanilla Direct, MindBody, ESL Gaming, Luckbox etc.
• $1.5Billion revenue / $103Billion transactional volume (2021E)
• $560 Million EBITDA (2021E) “forecast to rise significantly by 2023. Its projections show $744 million in adjusted EBITDA on 2023 revenue of $1.881 billion. That represents an EBITDA margin of 39.55%.” (21% CAGR)
• 10-15X growth projected in iGaming. US iGaming continues to be legalized state by state, growing revenue by 234% in just the last year. “At Paysafe, the iGaming market volume was estimated to be $3.4 billion in 2019, and is now projected to reach $47 billion in 2025.”
• Recently launched Paysafecash in US. Now in 40 currencies and 30 global markets for easier cross border payments
• Enabled for cryptocurrencies (Bitcoin, Bitcoin Cash, Ripple, Ether, Litecoin, EOS, XLM, XRP etc.)
• Paysafe owns Openbucks, Neteller and Skrill, 2019 winner “Best Digital Wallet” for best consumer take up and most innovative technology with “greatest potential to disrupt current ecosystems”. “Digital wallet and mobile payments operator Skrill, part of Paysafe Group, has also enabled an instant crypto-to-crypto feature, which allows for lower fees than if done via two separate transactions. Skrill users are no longer have to convert their crypto holdings back into fiat currencies before buying another cryptocurrency.”
• No. 1 in iGaming eCash network
• No. 2 in global digital wallet with presence in 120 countries
• No. 4 globally with independent merchants
• Highly differentiated B2B and B2C global network
• Strong 80% adj. cash conversion business model with no significant capex or balance sheet requirements
• 2017-2019 revenue grew from $800 Million to $1.4Billion (27%CAGR- including impact of acquisitions)
• 2019 Gross profit of $909 million (excluding depreciation and amortization)
• Merger cash to reduce debt by 2/3 and increase profit
• High profit margins with significant operating leverage. (Adj. EBITDA margins above 30% with path to 35%+) Expanding margin projections offers flexibility and plays into Bill Foley’s strength of pursuing inorganic growth.
• Highly experienced management team led by Philip McHugh, CEO of Paysafe and Bill Foley, Chairman of Fidelity
• Bill Foley, who drove value creation in Fidelity National Information Services from $2.5Billion MC to over $91Billion, says “Those characteristics of FIS are right in line with what we plan on doing with Paysafe.”
• Foley, a sophisticated dealmaker known for under-promising and over-performing, has led five separate multi-billion dollar public market platforms to complete over 100 acquisitions. In just the last five years, Foley and his team have grown Ceridian from $4.2B to $14B, Dun & Bradstreet from $2B to $11.3B and Black Knight from $1.6B to $14B. Foley’s consistent M&A track record in generating synergistic growth indicates Paysafe’s current growth projections are conservative. Foley and his investors also own a large portion of SPAC shares which aligns his motives with the common retail shareholder. Foley says Paysafe may be his “best investment ever.”
• Major institutional backing (PIPE) with profiles and sophisticated actuarial expertise indicating long term hold strategy: Fidelity National Title Insurance Co., Chicago Title Insurance Co., Commonwealth Land Title Insurance Co.
• PIPE lockup period = min 150 days (PE = min 80 days) protects shareholders from post merger sell-off. Lockup restriction does not apply to common retail shareholders.
• Warrants expire after 5 years. Conversion may be required if commons close above $18 for 20 out of 30 days.
• BFT shareholders = 22.5% of Paysafe, Sponsor allocation = 4%
• Current guidance for merger date is H1’21 . Expecting more guidance soon.
• Pundit coverage: Steve Grasso says BFT will triple (roughly $48) “BFT. It’s the most excited I’ve been about a stock in a long time. I’m looking for a triple and I think I’m going to get it.” Fwiw, CNBC’s Cramer calls BFT/Paysafe “terrific”, “smart” with “good bloodlines.”
• Paysafe price targets based on recent EV/EBITDA ratios of sector peers :
Nuvei : 54x > Paysafe = $42
PayPal : 59x > Paysafe = $45
Shift : 39x > Paysafe = $30
Repay : 77x > Paysafe = $60
Affirm: 89x > Paysafe = $69
Square : 218x > Paysafe = $169
Post-merger analysts’ 12 months price targets will look to 2022-23 projections with 35% higher EBITDA sending fair valuations higher. Combine this with the type of inorganic growth potential represented by Foley’s track record along with the fact that most institutions can only invest once the merger is complete and you start to get a sense of how far this can run.