Description

FG (Fundamental Global) New America Acquisition Corp.  

Amid the extreme negative bias currently engulfing the SPAC universe, we believe that we have uncovered an exciting investment in FGNA. Led by value creator Joe Moglia, retired Chairman and CEO of TD Ameritrade, FGNA has a definitive agreement to merge with OppFi, a leading Artificial Intelligence (AI) powered FinTech platform company.

Corsair believes that not all SPACs are created equal.  To that point, it seems OppFi is in a league of its own, as one of only a handful of SPAC targets which offers both strong historical profitability (EBITDA and Net Income) combined with 50%+ revenue growth.  Additionally, we believe pro-forma FGNA is highly undervalued on both a relative and absolute basis. 

We view the closing of the merger of OppFi and FGNA as the first major catalyst for significant stock price appreciation towards a target price of $36 if it were to be valued at just 30% the multiple of its nearest publicly comparable company.

FGNA Management

FGNA is run by Joe Moglia, a proven hall of fame business operator and long-term value creator, who grew TD Ameritrade from a $700 million market cap to $20 billion.  More specifically, in 1984, Moglia entered the MBA Training Program at Merrill Lynch and by 1988, he was Merrill Lynch’s number one producer in the world. Joe became the CEO of TD Ameritrade in 2001, and when he stepped down in 2008, shareholders had enjoyed a 500% return. Under Moglia’s tenure, first as CEO and then as Chairman, TD Ameritrade was a leader in the consolidation of the online brokerage industry, making and integrating several billion-dollar acquisitions and culminating with the announcement of a strategic sale to Charles Schwab.

“Joe did an extraordinary job leading TD Ameritrade as CEO and Chairman and has reached unparalleled success in both careers.” – Warren Buffett

Interestingly, Moglia is not only a winning leader in the board room, but also in the locker room. As the former head football coach at Coastal Carolina University, in six seasons, he turned around a losing program into 4-time conference champions with Joe not only winning multiple Coach of the Year honors, but also leading to his induction into the Lombardi Hall of Fame.  Similar to TD Ameritrade, Moglia then transitioned from Head Coach (i.e., CEO) to Chair of Athletics, recruited his successor coach and oversaw a football program that went 11-0 in the regular season and finished ranked #14 in both the AP and Coaches Top 25 Polls.  From what we can tell, Moglia’s impact on the organizations he touches is legendary and we are expecting similar with FGNA.

The “Spin-in” of OppFi – a Highly Profitable, High Growth Company in a Huge, Unpenetrated TAM

FGNA plans to combine with and “spin in” OppFi, an AI driven FinTech platform in the multi trillion-dollar US consumer credit market. OppFi is building what it refers to as the Digital Financial Services Destination for the Everyday Consumer with the mission to facilitate credit access, enable savings and build wealth for the over 100 million Americans who lack the savings for unexpected expenses (i.e., medical and car repair expenses) that come up from time to time. 

 “…look at the market opportunity. You've got 150 million people out there that have less than a thousand dollars in savings. A hundred fifty million…Then there's 60 million that actually lack access to traditional credit because they've got crappy credit scores. The market today for the current installment loan product that we have is about $27 billion…there are other products that are being rolled out. Right now, we've got a payroll deduction lending product and in the second half of the year we'll have credit cards. Those two products combined with the current installment product, that's an $80 billion market opportunity.” – Joe Moglia

We believe the crown jewel of OppFi is its credit decisioning technology.  OppFi’s proprietary algorithms look beyond credit scores to instantly identify borrowers who have the ability and willingness to repay.  Over the last 8 years, OppFi has hired highly talented artificial intelligence technologists and credit decisioning professionals to build a massive data set of over 7 billion data points, spanning 10 million applications, 1.5 million loans, 14 million repayment events and approximately 500 key attributes that provide proprietary insight guiding both willingness and ability to repay.  Oppfi believes these proprietary algorithms drive enormous alpha against traditional FICO scores.

Just as importantly to us, however, is OppFi’s commitment to customer service which complements its proprietary, data-driven decisioning, and credit models. Comparable to the most well-liked brands, OppFi’s platform maintains a 4.9/5-star rating with more than 14,000 online customer reviews and boasts an 85 Net Promoter Score, establishing it as one of the top customer-rated financial platforms online.

Growth Opportunities – Organic and Inorganic

“When I began at Ameritrade in 2001 our market cap was $700 million, and our mission was to bring financial literacy to every family in America. Similarly, OppFi’s mission is to bring financial inclusion to the Everyday Consumer. Today they achieve that by providing access to credit, and down the road through a full platform of financial services.” – Joe Moglia

While OppFi has tremendous growth opportunities in its current installment loan product, we believe OppFi is sitting on a timely opportunity to scale its platform into new and adjacent products.  Importantly, OppFi has proven that its AI technology is highly predictive and can drive extraordinarily profitable growth. 

OppFi has already announced plans to launch its first ‘graduation’ product, the OppFi Card, providing entry into the multi-billion dollar non-prime credit card market. Management is focused on this product roll-out, and on April 7th just announced a partnership with MasterCard, First Electronic Bank and Deserve. Today, the marketplace for non-prime credit cards looks similar to the market for installment loans before OppFi penetrated that market; there are a small number of incumbents that offer relatively low credit limits and high fees as a percentage of the credit line, mired by a poor user experience and low customer satisfaction.

In the future, management sees further accretive opportunities across auto lending, mobile banking, mortgages, and investment services – all financial products that will help the company become the Digital Financial Services Destination for the Everyday Consumer. 

“We think there is an opportunity for industry consolidation that can be highly accretive and fuel long-term growth of the OppFi platform for many years into the future.” – Joe Moglia

Valuation

With projected annualized revenue and EBITDA growth through 2023 of nearly 40%, FGNA seems cheap on any metric, trading at only 1.4x, 5x and 9x 2022 projected revenues, EBITDA and net income, respectively. 

“Now I want to put that [valuation] in perspective. Upstart…we think is a great company…but the heart-blood of OppFi is our technology and our platform. Our technology and our platform is every bit as good as theirs or anybody else's that's out there.  Now when you look at it, I don't know how I can look at this any other way than to really genuinely believe that OppFi frankly is dirt cheap, it’s just dirt cheap. And because that's one of the reasons why we didn’t really want to do a PIPE.” – Joe Moglia

On a relative basis to what is considered its closest peer Upstart (UPST - $104.25), OppFi’s pro forma market cap of approximately $820 million is only 8.5% of UPST’s approximately $9.6 billion market cap, illustrating the unusual upside that exists in FGNA shares. Conservatively valuing FGNA at just 30-50% of UPST’s market cap, FGNA would be worth approximately $36-60 per share. Based on 2020 financial metrics, for comparison purposes, OppFi actually outscored UPST, delivering significantly higher revenue and EBITDA ($323 million and $99 million, respectively vs. UPST’s $233 million and $32 million of revenues and EBITDA, respectively). While FGNA is currently trading way below the FinTech stock radar, having been lost in the current massive SPAC trade unwind, we believe it will begin to trade more in line with UPST as the story becomes more widely known and as we approach the close of OppFi’s merger with FGNA. 

Lastly, we believe both OppFi and FGNA are highly motivated to create shareholder value. In particular, it seems clear that the OppFi merger represents something personal for “Coach Joe”; that the mission he embarked on decades ago – to bring financial literacy and inclusion to everyone - is far from over and that he will continue to do what comes naturally: win. 

Catalyst

Close of merger with OppFi

Earnings Reports - continued strong growth

marketing of the story to long only funds

Analyst coverage - market to undrestand how unvervalued OppFi is relative to UPST

new product offerings for organic growth

accreditve acquisitions