IZettle sold to PayPal just prior to set of IPO
IZettle finalized its deal to be bought by PayPal Holdings for $2.2 billion the evening before the Swedish fintech startup was set to price its shares in an initial public offering.
It looked like an abrupt about-face for the company, which competes with Square Inc. and Canada’s Shopify Inc. On May 8 it announced it was seeking to raise 2 billion kronor ($226.6 million) in an initial public offering to be completed this year. Yet just days later, it’s been bought by a U.S. competitor.
Square shares fell as much as 3 percent as the market opened Friday in New York, but finished up 22 cents, 0.40 percent.
The decision from iZettle comes just over a month after Spotify became arguably Europe’s largest startup to refuse to sell up to a U.S. or Asian investor, listing on the New York Stock Exchange for about $27 billion.
“IZettle’s goal was to go for an IPO — there was no real dual track,” said Johan Brenner, partner at Creandum, an investor in iZettle. “The PayPal discussion became concrete extremely late and was only a done deal late last night.”
IZettle had been planning to price shares for its IPO on Friday, according to a person with direct knowledge of the deal who did not want to be named discussing a private negotiation. PayPal made a las-minute approach, said the person, who asked not to be named discussing a private negotiation, adding that there was no sale process or auction.
IZettle Chief Executive Officer Jacob de Geer on May 8 said the company was “fully focused” on the IPO plan announced that morning.
In an interview Thursday, de Geer said he changed his mind after meeting with the executive team at PayPal. He was convinced that his company could continue to grow substantially under the new owner and that their cultures would be aligned.
IZettle has been previously open to a sale as an alternative to an initial public offering.
Russ Shaw, founder of Global Tech Advocates, an industry body, said PayPal’s acquisition can be seen in two ways: that it’s a validation of global tech players paying increasing attention to European scale-ups, but also that it’s another example of a European tech company failing to scale significantly beyond becoming a “unicorn” worth a billion dollars.
“Five years ago people used to ask me if European tech would ever produce a successful exit or billion-dollar valuation,” he said. “In that light, iZettle’s acquisition needs to be applauded. However, our collective ambition has grown and we want an ecosystem that can produce tech firms with $10 billion or $50 billion valuations.”
The $2.2 billion PayPal is putting up for iZettle is the San Jose, Calif.-based firm’s biggest ever deal, according to data from Bloomberg.