Raiz Invest share price soars as sector-wide M&A heats up

In an unlikely year for small cap outperformance, fintech companies have found some much-needed love in the past three months from corporate dealmakers after they started sharpening their pencils and running the rule over some of the sector’s more undervalued counters.

The sector embraces any financial company that has adopted a near-100 per cent online presence and is conspicuous for its ability to generate recurring revenue. The combination of a low-cost base online and a high gross profit generated through a Software as a Service (SaaS) business model has become an irresistible investment opportunity for those looking for high growth.

More than 300,000 Australians have turned to the innovative micro-investment technology platform and investment fund, Raiz Invest, to help them with their investments and savings.

Raiz Invest is one stand-out company that has seen its share price benefit from the new-found interest in the sector, rallying an eye-catching 38 per cent in the past week to a high of 60c a share. The sudden move has put a spotlight on its credentials as another potential takeover target in the fintech sector.

Raiz Invest managing director and CEO Brendan Malone told Bulls N’ Bears: “Given recent market activity, I would not be surprised if other parties were running the ruler over our financials.”

Raiz is an innovative micro-investor platform and investment fund offering app-based technology that allows customers to round up any card-based purchase to the nearest $1, $2 or $3.

The rounded-up portion is then tipped into a personalised fund which Raiz invests in the stock market.

‘Given recent market activity, I would not be surprised if other parties were running the ruler over our financials.’

Raiz Invest managing director and CEO Brendan Malone

With its clever approach to marketing and strong growth in investment performance, Raiz’s customer numbers have surged in the past few months, bringing its up to a total 314,127 clients by the end of the September quarter. It currently has total funds under management surpassing $1.5 billion.

Raiz’s accelerating funds under management and customer count led to a revenue hike of 15.2 per cent year-on-year, touching $5.66 million for the latest quarter.

More broadly across fintech, early in 2024 there were signs the sector was in a recovery and growth mode, starting with Melbourne-based alternative investment fund Salter Brothers buying SME-focused lender Prospa for $74m.

In September, online stockbroker eToro piqued interest when it invested in the savings and superannuation sector by acquiring Australian investing app Spaceship for $80m.

Since founding Spaceship in 2017, its management has seen the company’s customer base grow to more than 200,000 clients with more than $1.5b under management.

Given Raiz’s funds under management and customer numbers are on a par with Spaceship’s, its current market capitalisation of $53m doesn’t look like a challenging target compared to Spaceships’s $80m price tag. It could also be a reason for the revaluation taking place in Raiz’s share price.

eToro also partnered with Spaceship to give its users easy access to Spaceship’s high-performing superannuation products, including its GrowthX super fund that has notched up a return of 11 per cent per year since the fund was launched eight years ago.

In return, Spaceship customers gained access to eToro’s multi-asset investment platform, which includes stocks, exchange traded funds, commodities and crypto currencies.

In November, the eToro acquisition was backed up by further corporate action hitting the headlines, with Melbourne blue-blood stockbroker Bell Potter announcing its intention to buy another fintech business, ASX-listed Self Wealth, for $51m. The deal added 130,000 new customers and $11b in sponsored shareholdings to eToro’s books.

Given these developments, it seems unsurprising that fintech has enjoyed a strong year of share price appreciation in 2024. Bigger companies in the broader tech space, such as Wisetech, have doubled their share price in the past year, while “buy now, pay later” advocate Zip Co has boomed nearly 550 per cent since January.

Another 2024 ASX-listed star performer is Findi, a fintech providing online banking services to underserviced clients in India. The company started the year at 92c a share, but oversaw a stellar share price move to $8.30 a month ago, putting it on the edge of hallowed 10-bagger territory.

As the market looks forward to prospects for 2025 and anticipates which sectors could provide the excitement, fintech is heading a short but elite list of industries that have provided solace in 2024.

With a dearth of other opportunities in the small and mid-caps right now, it would come as no great surprise if the fintech sector continued to carry the baton for growth into 2025 amid further consolidation in the industry. And a few companies, including Raiz, could lead the way.

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