What happened
Fintech stock Marqeta (MQ 4.05%) had a prosperous day on the market Tuesday, rising at an almost 3% clip to nearly double the percentage gain of the S&P 500 index. Investors, it seems, were reconsidering their initially bearish stance on the company's splashy new effort at expansion.
So what
On Monday, Marqeta announced that it has agreed to purchase privately held Power Finance, a business that operates a credit card management platform. This is the company's first acquisition.
Marqeta will pay up to $275 million in cash to own Power Finance. Around one-third of this amount is payable over the next two years provided certain conditions are met; Marqeta did not provide any details on those conditions. That total consists of a potential $52 million milestone payment that is expected to be met within one year. Again, the fintech was light on details regarding the milestone.
Like its owner-to-be, Power Finance is a relatively young company, having been founded in early 2021.
In its press release touting the acquisition, Marqeta stressed its synergistic potential.
"The combination of Marqeta and Power's platforms allows Marqeta to directly offer its customers the tools they need to create innovative credit products that meet the changing demands and expectations for credit cards from consumers and businesses," the company wrote.
Marqeta expects the deal to close at some point this quarter.
Now what
The initial investor pull-back following the Power Finance news was understandable, as was Tuesday's positive rally.
After all, while it's shown some impressive revenue growth figures, Marqeta remains a habitually loss-making company. So the knee-jerk reaction to news of a relatively pricey acquisition is hardly surprising. But Power Finance appears on paper to be quite a compatible and complementary business for its purchaser, a fact that likely heartened investors on Tuesday and brought some interest back to Marqeta stock.
