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OFFICIAL: Capital One to acquire Discover for $35 billion 🤯🤑; PayPal’s first AI investment 💸🤖; Monzo nears $5 billion valuation in new funding round 😳💰
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OFFICIAL: Capital One to acquire Discover for $35 billion 🤯🤑; PayPal’s first AI investment 💸🤖; Monzo nears $5 billion valuation in new funding round 😳💰

FinTech is Eating the World, 20 February

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Linas Beliūnas
Feb 20, 2024
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Linas's Newsletter
Linas's Newsletter
OFFICIAL: Capital One to acquire Discover for $35 billion 🤯🤑; PayPal’s first AI investment 💸🤖; Monzo nears $5 billion valuation in new funding round 😳💰
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Hey Everyone,

Happy Tuesday! Today’s issue is the most interesting one yet as we’re going to look at Capital One officially acquiring Discover for $35 billion (quick recap of why it’s huge + some priceless bonus deep dives), PayPal that did its first AI investment (why it’s a good deal + bonus read & further dives into PayPal), and Monzo which nears $5 billion valuation in new funding round (what this signals + bonus reads & deeper dives into Monzo Bank). Let’s jump straight into the fascinating stuff 🌶

OFFICIAL: Capital One to acquire Discover for $35 billion 🤯🤑

The news 🗞️ Following yesterday’s reporting that the deal is about to close, Capital One COF 0.00%↑ today is officially acquiring Discover Financial DFS 0.00%↑ for a whopping $35.3 billion.

Let’s quickly recap the deal that will create a global payments and finance giant.

More on this 👉 Capital One, the US lender backed by Warren Buffett, is set to buy Discover Financial Services in a $35 billion all-stock deal that will bring together two of the biggest credit card firms and allow them to compete with other Wall Street behemoths.

This is the biggest M&A in 2024 that would create the largest credit lender in the US and the 6th-largest US bank by total assets 🤯

But that's not it.

This M&A will also give Capital One a foothold in the world of payment networks.

- Discover is a payments network, but it is also a bank. 

- American Express (AmEx) AXP 0.00%↑ is a network but also a bank.

- Visa V 0.00%↑ & Mastercard MA 0.00%↑ are both payment networks, but not banks. 

✈️ THE TAKEAWAY

Why this matters? 🤔 With Discover, Capital One would not only become the largest credit lender in the US and one of the largest US banks by total assets. More importantly, given Discover’s unique network, it would also become more akin to AmEx and could hence better compete with the largest payment networks and maybe better challenge the current duopoly. And that's exactly why regulators will likely approve this deal. Massive.

By the way, the market illustrated this very well as Visa shares were down ~1.6% on Tuesday, while shares of Mastercard, which has a bigger exposure to Capital One, were down 3.45%. Discover, obviously, is up +12.3%:

Go deeper here: Capital One nears deal to acquire Discover Financial for $28 billion 😳

ICYMI: Visa's strong Q1 2024 results and outlook despite macroeconomic headwinds 📈 [analyzing the latest data & graphs & taking a big picture view + some bonus deep dives into Visa]

Strong growth for Mastercard despite macro headwinds 📈 [analyzing the latest data & graphs & taking a big-picture view on the stock price + some bonus deep dives]

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