Market Overview

Fintech ETFs Mixed On News Of Mega Merger

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Fintech ETFs Mixed On News Of Mega Merger

Industry consolidation is a theme expected to positively affect fintech and mobile payments stocks and the related exchange traded funds this year and going forward.

Investors were reminded of that Monday when Fidelity National Information Services, Inc. (NYSE: FIS), a provider of payment services and technologies, said it will acquire rival Worldpay Inc. (NYSE: WP) in a cash and stock deal that values the latter at $3 billion.

What Happened

The deal is the biggest to date in the payments industry, but ETFs with fintech and mobile payments exposure were mixed on Monday.

The Global X FinTech ETF (NASDAQ: FINX), which tracks the Indxx Global FinTech Thematic Index, fell by 0.77 percent on volume that was slightly above the daily average. Some of that decline is attributable to the 0.70 percent dip in shares of Florida-based Fidelity National. That stocks is, as of March 15, the sixth-largest holding in FINX at a weight of 5.61 percent, according to Global X data.

Worldpay, which of course surged on news of the deal, is not one of the 37 stocks held in FINX, which likely explains why the fintech ETF traded slightly lower.

Why It's Important

The ETFMG Prime Mobile Payments ETF (NYSE: IPAY) rose 0.81 percent on above-average volume. As of March 18, Fidelity National and Worldpay combined for nearly 9 percent of IPAY's weight and both stocks were top 10 holdings in the ETF.

Entering Monday, 97 ETFs had exposure to shares of Worldpay with IPAY ranking as the ETF with the second-largest percentage weight to that stock.

Nudging out IPAY in terms of Worldpay exposure is the newly minted and overlooked Tortoise Digital Payments Infrastructure Fund (CBOE: TPAY), which debuted in late January. As of March 18, Worldpay was TPAY's fifth-largest holding at a weight of 4.65 percent, according to issuer data.

TPAY “invests in companies that have the potential to benefit as the world continues to evolve from traditional cash payments to the speed, accuracy and efficiency of digital payments,” according to Tortoise.

What's Next

Betting on more payments industry consolidation is speculation at this point, but this year, the industry is showing an appetite for deal-making. In January, Fiserv Inc. (NASDAQ: FISV) agreed to a $22 billion deal to acquire rival First Data Corp. (NYSE: FDC). One or both of those stocks reside in the aforementioned ETFs.

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