Grab This Under-$10 Fintech Innovator – Before its Merger Deal Launches the Shares
If you live in the U.S., there is a very good chance that you’ve got a friend named Dave.
Heck, you could be a Dave yourself.
As recently as March of this year, David was the sixth-most-common name in America.
There are approximately 3.56 million “Daves” in the U.S. alone, and a brand-new fintech start-up just added one more that’s reportedly worth – wait for it – $4 billion.
Founder and entrepreneur Jason Wilk, thinking to himself that, “everyone’s got a friend named Dave, right?” created the company Dave Inc. Simply referred to as Dave or dave.com, the company got its start back in 2016 marketing itself as a “friend” you could turn to for a small loan to bump up your balances and to avoid pesky overdraft fees – which average at $38 a pop if you happen to tip too much on a debit card or mistime a direct deposit.
Now, this is a sound concept for a company and fintech is a lucrative space to be in, but that’s not the only reason this particular Dave is grabbing headlines right now. Dave agreed to merge into the recently IPO’d VPC Impact Acquisition Holdings III (NYSE: VPCC), which valued Dave at that whopping $4 billion.
VPC Impact is one of the so-called “blank-check companies” you’ve probably been reading a lot about lately. More specifically, it’s a Special Purpose Acquisition Company (SPAC) Special Purpose Acquisition Company, or SPAC, that offers individual investors opportunities to buy into startup ventures.
VPCC – soon to be Dave – is generating a lot of SPAC buzz.
To gauge whether it deserves the press it’s getting, let’s a quick overview of what the company has to offer. Like I said before, Dave’s main objective is to keep you out of overdraft territory and keep your hard-earned money in your pockets, not in the wallets of big banks, but that’s not all it does.
A Financial Friend in Need
Dave offers non-interest-bearing demand-deposit accounts and debit cards through its partnership with Evolve Bank & Trust. You can open an account at Dave and you can link an existing bank account to your Dave Mobile App.
With a “Dave Spending Account” a subscriber can avail themselves of “Advance Services” to get “free advances to cover upcoming expenses up to $100” if linked to another account. Which is perfect for bumping up your checking account balance, so you don’t get hit with those overdraft fees.
The company also uses A.I. to predict upcoming expenses. Its “Budget” service tracks subscribers’ income and transactions to help pay upcoming bills and expenses.
And Dave offers “Side Hustle,” a network posting site that helps gig-economy jobseekers “discover and apply for work right from your phone.”
Again, it’s a solid concept, but whether or not you back a SPAC as an investor hinges on a few other key factors, one of the biggest being profitability. Since Dave is a private company – and we don’t have access to its financial statements – we don’t know if the company is making money or not.
What we do know is that Dave’s principal revenue comes from the $1 a month it charges subscribers, which may seem small but subscription-as-a-service, or SaaS, is an incredibly profitable model that lends itself to long-term moneymaking.
There’s a lot I like here about Dave, which is why I’d consider buying VPCC, the common shares of the SPAC that will hopefully become “DAVE” once the transaction is finalized. Right now, VPCC is trading at about $9.88.
If the merger is successful, meaning the deal closes and VPCC becomes DAVE, and DAVE is a successful company generating increasing amounts of subscribers and revenues, the stock should take off.