Apex Clearing to Go Public via SPAC

Northern Star Chair Joanna Coles (Photo: Bloomberg)

Apex Clearing and Northern Star Investment Corp. II, a special purpose acquisition company started by New York Islanders co-owner Jonathan Ledecky, have announced plans to merge.

As part of the deal, Apex is expected to become a publicly traded entity on the New York Stock Exchange. The terms of the transaction value the combined firm at about $4.7 billion.

"Big #AdvisorTech news," tweeted industry blogger Michael Kitces on Monday. "@apexclearing going public via SPAC. Raising $850M cash in the process for growth. Seeing the opportunity to take on #Schwabitrade more directly?"

For the transaction, Northern Store is raising roughly $450 million from investors that include Fidelity Management & Research Co. In addition, the deal is set to give Apex some $850 million in gross cash proceeds.

Apex says its digital custody and clearing platform has about $100 billion in assets under custody. It's added $14 billion in new assets and 3.2 million accounts so far in 2021, including over 1 million new crypto accounts.

Its clients include Stash, Firstrade Securities Inc. and Social Finance Inc., as well as Goldman Sachs' digital consumer bank Marcus.

Post-Merger Management

Following the closing of the deal, Apex CEO William Capuzzi and Apex President Tricia Rothschild will stay on in their current roles. Northern Star Chairwoman and CEO Joanna Coles, the former editor-in-chief of Cosmopolitan magazine, will join the combined firm's board.

"We are in the first inning of the digital revolution in financial services, and our merger with Northern Star will provide Apex with the resources and flexibility to accelerate our growth, scale our platform, and expand our offerings and market share alongside our clients," said Capuzzi in a statement.

The custody and clearing field is not just a "high-cost-of-entry business, but also, more importantly, it is a high-cost-of-failure business, and our clients and their customers depend on Apex to safeguard their assets," according to Rothschild. "We look forward to continuing to fulfill this obligation … for both established and emerging financial services companies navigating the markets of today and tomorrow."

Apex is "constantly innovating by offering solutions like fractional share trading and crypto trading in real time that is leading the democratization of investing," Coles said in a statement.

The firm is "at the nexus of the digital financial services revolution and is poised to thrive amid the powerful secular tailwinds and generational shift towards digitization of investment management," Coles explained, adding that she is "thrilled to help play a part in [its] long-term success."

Apex, which is owned by the fintech firm Peak6, served as Robinhood Markets' clearing firm before the trading app rolled out its in-house clearing platform in 2018.

Its operating revenues were about $236 million in 2020, and its adjusted earnings before interest, taxes, depreciation and amortization were $86 million.

Image: Northern Star Chairwoman Joanna Coles, the former editor-in-chief of Cosmopolitan magazine, will join the firm's board. (Photo: Bloomberg)