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Rating:Via SPAC, a $4.7B-AUM Robo Will Go Public Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, May 27, 2021

Via SPAC, a $4.7B-AUM Robo Will Go Public

Reported by Neil Anderson, Managing Editor

Seven years in, a roboadvisor is poised to go public later this year.

Noah Kerner
This morning, Noah Kerner, CEO of Acorns Grow Incorporated, and Jonathan Christodoro, chairman of Pioneer Merger Corp., unveiled a deal under which privately held Acorns will merge with publicly traded Pioneer (a SPAC trading under PACX on the Nasdaq). The deal, slated to close in the latter half of 2021 (pending approval for Pioneer's shareholders), would transform the combined company into Acorns Holdings, Inc., using a new ticker (OAKS, also on the Nasdaq), with Kerns staying on as CEO. The deal is expected to value the combined company at $2.2 billion.

(Pioneer has already made several SEC filings, which offer more insights into the merger.)

Citi is advising Pioneer on the deal and is the placement agent on the concurrent private placement, while Moelis & Company LLC is advising Acorns. On the legal counsel side, Kirkland & Ellis LLP is supporting Pioneer, Paul Hasting LLP is supporting Acorns, and Latham and Watkins LLP is supporting the private placement.

Acorns, founded in 2014 by Walter and Jeff Cruttenden, now has more than 9 million signups, including more than four million "loyal everyday American subscribers." According to its most recent form ADV (filed on May 19), Acorns had $4.736 billion in AUM and 4.346 million clients (4,345,537, to be exact). So Acorns' average account size is tiny by wealth management industry standards: that AUM translates into an average of $1,089.93 per client. Meanwhile, the $2.2-billion valuation of the SPAC deal translates into a whopping 46.5 percent of Acorns' AUM, a valuation that any asset manager would be envious of (but a far cry from its early stage 332 percent of AUM valuation back in 2015).

Yet Acorns' business model differs from those of traditional asset and wealth management shops (though like other roboadvisors, its portfolios have traditionally been built out of ETFs). Instead of AUM-based fees or commissions, Acorns charges flat monthly fees of $1, $2, or $3 per account. And they use an app, and the idea of rounding up when purchasing, to help encourage small, frequent contributions, especially among younger investors, with an eye towards building long-term relationships and habits. Back-of-the-envelope math suggests that those 4.346 million clients translate into between $4.346 million and $13.037 million in monthly revenue, or between and $52.146 million and $156.439 million in annual revenue (with a staff, according to the form ADV, of 304 employees, not including clerical workers). Framed that way, the $2.2-billion valuation then translates into between 14 and 42 times revenue, roughly.

Acorns' current backers include BlackRock and Capital Group, as well as fintech giant PayPal, cable and media giant Comcast (through its NBC Universal and Comcast Ventures arms), and other PE and VC firms. (Other institutional investors in Acorns include: Bain Capital, DST Global, eVentures, Greycroft, Rakuten, Sound Ventures, and TPG.) The roboadvisor's backers also include a number of celebrities, like Kevin Durant, Dwayne Johnson, Ashton Kutcher, and Jennifer Lopez, plus at least one fundster CEO. (Kerner is actually Lopez's ex-DJ!) And Acorns' economic advisors include the likes of Schlomo Benartzi, Harry Markowitz, and Dick Thaler.

Pioneer, meanwhile, IPOed back in January, raising $402.5 million. Its backers include Falcon Edge Capital and Patriot Global Management, and its executive team includes a former CEO of E*Trade, a co-founder of Uber, and other tech investing veterans. 

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