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Home / Business / Why Sweden sold iZettle to PayPal for $ 2.2 billion instead of IPO

Why Sweden sold iZettle to PayPal for $ 2.2 billion instead of IPO



The announcement that Sweden's iZettle would go public ten days ago sparked applause among European technology boosters, which proved short-lived. Rather than watching the rise of an independent technology company, another local startup was devoured by a US tech giant.

In this case, PayPal, which has announced, has paid $ 2.2 billion for the Swedish fintech company. This price tag is the first indication of why iZettle took over the money and not the IPO. The latter should bring the payment company a valuation of just under $ 1.1 billion.

iZettle co-founder Jacob de Geer wrote a note in which he explained the decision of how companies are joining similar cultures, visions and

"By joining the PayPal family, we will become iZettle with superpowers and jump to one fast track to realize our vision, "he wrote. "The ability to become part of PayPal was too good to reject, not just because of what it means for iZettle and iZettle employees, but also because of what we can offer our dealers." [1

9659002] All this may prove true, although tech mergers tend to start off such optimistic feelings, only to eventually run into the realities of a long history of failures. There is always a chance that the iZettle PayPal connection will be an exception, but success is far from guaranteed.

Since iZettle is in 12 countries compared to 200 for PayPal, the latter can certainly help to negotiate faster with the various regulatory issues that are needed to expand into new regions. But it remains to be seen how iZettle will be integrated (or not integrated) with PayPal's own competitive point-of-sale payment services.

Nevertheless, the IPO for iZettle is likely to pose even greater risks. On May 8, the company announced its intention to list on the Swedish Stock Exchange, but had given only preliminary financial details. The company had not published a fuller prospectus before the PayPal deal.

Of course, the numbers that iZettle published are bullish. The company is on track to earn $ 165 million this year, up 60 percent from a year ago, while losses seemed to be easing.

With this dynamic, the company hopes to raise about 227 million US dollars with the IPO. But it had not got around how much of it, for example, went to insiders who sold shares, and how much would flow into the corporate treasury. Speaking of that, iZettle has raised a total of $ 150 in venture capital over the years, including a round of $ 47 million last December. But at least $ 83 million of it was debt financing. Between paying off these debts and possibly watching money to go insider, the flotation suddenly seems less like a possible corporate fortune. Of course, the company itched for this money after seeing another American competitor Square in the UK market last year and talking about its European ambitions. With a market capitalization of approximately $ 22 billion, Square likely had brand awareness and financial resources to give iZettle a good run on its central point-of-sale market.

The prospect of Square and PayPal fighting The hearts, heads and purses of retailers, with far less financial resources, would force iZettle managers to do a sales job to make their IPO a success not to mention growth and profitability.

So when PayPal knocked, it was no surprise that IZettle was ready to listen. The $ 2.2 billion price tag is sure to become one of Europe's largest deals, though PayPal has still not explained in detail how much of it is cash or stock, or whether it includes assumptions about iZettle's existing debts.

For the part of iZettle, the company seems to maintain some independence, and de Geer will continue to operate in Stockholm. But European technology boosters will settle for another important branch of a US technology company.

"iZettle will become a center of excellence for PayPal's product and service offerings for small businesses, which I'm looking forward to," wrote de Geer. "The creation of a competence center in Stockholm with global reach means a lot to me."


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