Fintech company Marqeta is expected to go public this week on Wednesday, June 9. The company has filed to list on the Nasdaq under the ticker symbol MQ. It expects to raise $1 billion from its IPO, which could give it a valuation of more than $12 billion.
Marqeta is based in Oakland, California, and was founded in 2010. The company works kind of “behind the scenes” to provide a vital service to its customers, which include well-known companies like DoorDash (NYSE: DASH), Instacart, Square (NYSE: SQ), and Klarna. It was founded to create modern card issuing. What does that really mean? Well, as the company explains in its IPO prospectus:
When you order food using DoorDash or groceries using Instacart, modern card issuing works in the background as money moves from the app to the delivery driver’s payment card, allowing the driver to pay for exactly what you ordered, and nothing else.
When you buy a big screen TV and pay for it in installments using Affirm or Klarna, modern card issuing helps move money to the payment card that Affirm or Klarna uses to seamlessly pay the merchant.
When you receive money from your friend through Square’s Cash App, modern card issuing helps move the funds to your debit card, making it instantly available to you to make purchases.
Marqeta offers application programming interfaces (APIs) that assist companies by using Marqeta’s relationships with banks and card networks worldwide. The digital economy is rapidly growing and Marqeta provides a service that empowers its customers to do business efficiently and effectively. Before Marqeta’s platform, issuing cards and processing payments was slow, complex, and left room for mistakes along the way. Marqeta’s API-powered platform eliminates many of those past problems.
Commerce continues to shift to online and mobile payments, and if you aren’t providing the option to your customers, you are missing out on revenue. That’s why it’s important for a business to have seamless technology it can trust. Marqeta does have competition in this growing market. Similar payment companies include Fiserv, FIS, Stripe, and Adyen. However, Marqeta was one of the first to offer a platform for modern card issuing and transaction processing. This innovation has allowed it to lead its industry.
According to Statista, from 2021 to 2025 the digital commerce market is expected to have an annual growth rate of 8.76%. Additionally, Statista reports that the average transaction value per user in the digital commerce market is expected to amount to $1,099 in 2021. The sustainability of this market is apparent. As digital commerce grows, companies will need Marqeta’s platform and services.
Digital commerce has become a part of our daily lives. I’ve personally used apps like Klarna and Affirm to buy things. When I used Klarna, I received a virtual card with the amount I requested to spend at the retailer. It was simple and quick; I checked out in a matter of minutes. So finding out Marqeta is behind that process has me very interested in the company and its upcoming IPO.
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Marqeta Financials and IPO Details
The company has had strong revenue growth, reporting $108 million in the first quarter — an increase of about 123%. Its net loss decreased to $12.8 million from $14.5 million from the previous year. In the year ending March 31, 2021, Marqeta reported an impressive and enviable free cash flow of $74.2 million.
The company plans to sell 45.5 million shares. Its IPO price target is $20–$24 per share. Marqeta plans to use the money it raises from its IPO for general corporate purposes, in particular, funding its growth plans including investing in its global business. Its underwriters include Goldman Sachs, J.P. Morgan, Citigroup, Barclays, William Blair, and KeyBanc Capital Markets.
Within an IPO filing, a company must disclose risk. Marqeta’s prospectus revealed:
Our net revenue growth in recent periods has increased, as additional consumers have shifted to using these services. If this trend in consumer demand and spending patterns slows or reverses as shelter-in-place restrictions ease and as the pandemic subsides, our net revenue growth may be adversely affected.
That’s definitely something potential investors should keep in mind, however, over the last year people have become more comfortable with e-commerce. I think a lot of consumers have grown accustomed to these new ways to spend their money. Not to mention, in order to adapt to the pandemic, businesses have budgeted for and invested in these types of payment technologies. I can’t see them going back just because the pandemic is over. Some businesses may have even found them to be easier and more secure.
Marqeta’s IPO will be one to watch.
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Until next time, Monica Savaglia Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.
