David Cote bought a controlling stake in CompoSecure at $7.50 a share in August 2024, and the shares now trade near $20, according to Parsa Kiai of Steamboat Capital.
CompoSecure holds about 80% of the premium metal card market, and Kiai argues physical cards stay resilient despite Apple Pay.
Kiai names Idemia, Thales and CPI Card Group as rivals, and calls the long-term mobile wallet threat and Resolute's pay structure key risks.
Metal credit cards make CompoSecure a quiet, dominant niche business
CompoSecure makes premium metal cards, a small cost for issuers that helps win high-spending customers, and it holds most of that market with very high margins. The stock was left for dead after a 2021 SPAC listing, and David Cote's takeover of control adds an acquirer's playbook on top of steady organic growth. The bet is that physical cards persist and that Cote and Arculus extend the story.
Takeaways
Metal cards pay for themselves for issuers. High-fee cardholders spend about $3,000 a month versus $1,000 on lower-fee cards, a $24,000 yearly gap that drives interchange. Issuers pay CompoSecure about $12 a card against $1.25 for plastic, and Kiai estimates plastic returns less than a fifth as much.
CompoSecure dominates a highly profitable niche. Kiai estimates about 80% share of premium metal cards. The 2024 10-K shows the segment at roughly $400m of revenue and 31m cards, with 53% gross margins and 42% EBITDA margins. Idemia and Thales are capitalised rivals that also resell its cards.
Physical cards are holding up against Apple Pay. American Express account acquisition rose 50% after its 2016 refresh and doubled after its 2025 refresh. Digital-native issuers such as Coinbase and Robinhood use metal cards, and cash still carries 17% of transactions. Mobile wallets remain the long-term threat.
David Cote's control is the central thesis. Cote became controlling shareholder in August 2024 by buying out the private equity sponsors and co-founder Michele Herslow, at $7.50 a share. The stock now trades near $20. Kiai credits his operating approach and a 150 to 200 deal M&A record.
The Resolute Holdings structure is the contested piece. Resolute was spun out to CompoSecure shareholders and receives a 10% royalty on CompoSecure's EBITDA. It is valued around $700m, with shares near $80, and about $15m of revenue covers the cost of searching for deals. Its pay structure is a risk.
Arculus is an option on security growth. The digital cold wallet lost about $20m at the operating level before 2024 revenue reached almost $11m at 80% gross margins. Kiai says it could combine with cold wallet and security revenue pools to exceed $300m.
The SPAC era left the stock mispriced. CompoSecure listed in 2021 through a SPAC at a $1bn enterprise value amid unrealistic expectations. Kiai calls it a broken IPO hiding a gem, valued when his firm invested as if no one would use credit cards in three or four years.
Catalysts, risks and lessons
American Express's earnings response is a near-term catalyst. Its stock did well and it raised guidance after last week's results.
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On this episode 2
Show 1
Arculus reaching positive cash flow is a second catalyst for Kiai.
M&A under Cote is a third catalyst, likely aimed at payments hardware, software, security and authentication.
Competition is a long-term risk, since CompoSecure will not keep a monopoly forever.
Kiai's broader lesson is to look for overlooked businesses that are mission critical to large customers at small cost, as with Transdigm and Air Products.