Why Dealmaker Betsy Cohen Believes SPACs Will Make A Comeback

The longtime banking entrepreneur and fintech investor made a fortune helping companies go public through reverse mergers before the market cratered. Here’s why she hasn’t given up on the out-of-favor financing vehicle.

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During the Covid19 years, investors flocked to special purpose acquisition companies: Shell companies that raise money through IPOs, then acquire a private company to take it public. These reverse merger vehicles – better known as SPACs – have fallen out of flavor amid rising interest rates and slumping stock valuations.

But one prominent dealmaker, Betsy Cohen, says they’re due for a comeback.

“It will come back, because it serves a need,” says Cohen, who helped take seven companies public through SPACs between 2015 and 2021, making her one of the industry’s more prolific “sponsors.” (Sponsors take the shell companies public, then negotiate an acquisition of a merger target). These deals helped Cohen, age 81, build her estimated $245 million fortune, which puts her at No. 98 on Forbes’ just-published annual list of America’s Richest Self-Made Women.

Cohen is reluctant to predict when SPACs will come back in style. “Timing is always an estimate because external factors change,” she says. However, she believes that in their next wave, more SPACs will be targeting “companies that have not only good but tested products, but that have enough history to make projections meaningful.”

Cohen has not been spared the SPAC comedown. Her biggest would-be deal, a reverse merger that valued trading app eToro at $10.4 billion, fell apart last summer. Six of her SPAC entities (including the eToro one) wound down and returned money to investors in late 2022 and early this year after failing to complete mergers.

As a result of the changing environment, Cohen’s investment firm – which she runs with her son, financier Daniel Cohen – has pivoted its investment strategy towards venture capital investments and away from SPACs. The Cohens renamed their investment firm Cohen Circle late last year – it was formerly Fintech Masala – in part to reinvent their brand with investors and the public.

“The name Fintech Masala was so associated with SPACs alone, it just didn’t do,” Cohen told Forbes in a recent Zoom interview from her home in New York City. “We were taking advantage of our knowledge of late stage fintech companies and those that were ready to go to the public market, but recognized over the last couple of years that the market was, in fact, going to have some pain.”

Numbers tell the story: In 2020 and 2021, there were 861 blank check companies that raised $246 billion on U.S. public markets, a tenfold increase in funding from the previous two-year period, according to financial data provider SPACInsider. In 2023 so far, just 15 SPACs have listed, raising less than $2 billion.

During the pandemic craze, says Cohen, there were too many firms seeking out blank check-enabled IPOs that weren’t ready to become public companies. “If the sponsors had looked for not only companies that wanted to be public, but good companies that should be public, we would have had many fewer SPACs and the market might have been more resilient,” she opines.

According to Cohen, there have been three previous SPAC booms, all of which were tied to specific sectors: The first wave in the 1990s, SPACs were focused on industrial firms; in the aftermath of the great recession, SPACs targeted real estate companies; and during the pandemic , SPACs went after technology firms. The fourth wave will be less “sector dependent” and more “company dependent,” she says.

As SPACs fizzled, Cohen and her investment teams kept their focus on fintech. Over the last year, she’s been prioritizing venture bets on a niche area within financial technology known as “embedded finance,” – startups that offer financial solutions that can live on – or, be embedded within – companies’ websites and apps. So far, the Cohens’ fund dedicated to embedded finance has made 15 investments. Bets have included companies like Maxwell, a cloud-based digital mortgage platform targeting; Railsr, a credit card reward embedding platform targeting retailers and sports teams; and Sure, which provides APIs (application programming interfaces–data plugins for websites) and other software to insurers.

Cohen has been investing and building companies for decades. She founded Philadelphia-based Jefferson Bank in 1974, sold it 25 years later, and then founded banking tech firm The Bancorp, which she ran as CEO until the end of 2014. Her planned retirement was short-lived. In February 2015, she and her son Daniel listed their first SPAC entity, Fintech Acquisition Corp., raising $100 million. It merged the following year with credit card payments firm CardConnect Corp. which was then acquired by fintech giant First Data for $779 million in 2018.

Cohen’s second SPAC, FinTech Acquisition Corp. II, merged with money wiring service Intermex (now named International Money Express) in 2018. In 2020 and 2021, Cohen completed SPAC mergers with payments firms Paya Holdings (which was acquired by Nuvei for $1.3 billion earlier this year) and Payoneer Global, as well as used car marketplace Shift Technologies, digital insurance company Metromile Inc., and financial advisory firm Perella Weinberg Partners.

If SPACs do come back in vogue, it’s a smart bet that Cohen will be early to the game and ready to execute. Says Andrew Bednar, CEO at Perella Weinberg Partners: “She has invested the time and effort into understanding the SPAC ecosystem better than almost anyone.”

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