IPO-yay! It’s Fintech Float Season :-)
Investment bankers must be lining their pockets as Fintech Float Season has arrived. After a decade of FinTech developments with a few floats, of which the biggest have been companies like Square and PayPal, who were recently worth more than Goldman Sachs and Bank of America respectively.
Now, there are a herd of FinTech firms about to float, and they need investment banks to do this. Woo-hoo! It’s profit time! Yippy-ki-yay, as Bruce Willis would say.
This struck me when I posted three major headlines yesterday:
- Fintech floats “just getting started” as Zopa Bank prepares to go public
- Warren Buffett, Goldman Win From Fintech Gold Rush in India
- Buffett-Backed Fintech Nubank to Seek $50.6 Billion Valuation in IPO
The key content of those headlines included:
“Fintech is starting to reach a maturity point where we’re getting some big companies now like Zopa and Wise; I think we’re at that point in the cycle,” [Myles Milston, chief executive of Globacap] said.
“Fintech 10 years ago was a relatively new concept but it has evolved massively over the past 10 years. Since the 2007 recession, the sector has really bloomed and I expect we will see more firms move towards becoming public.”
Nu Holdings, the Brazilian digital bank backed by billionaire Warren Buffett’s Berkshire Hathaway Inc., is seeking a valuation of as much as $50.6 billion in its initial public offering, making it one of Latin America’s biggest companies.
Berkshire Hathaway, which invested $300 million in Paytm in 2018 for a nearly 3% holding could see the value of its stake rise about 70% at a $20 billion valuation, while Paytm’s other international backers would also profit. Investment banks including Goldman Sachs Group Inc. -- which is working on Paytm’s IPO -- have been bolstering their teams in the country and are benefiting from the spate of deals and the flurry of fund raising.
It is noteworthy that Warren Buffet is leading in two of those headlines, as is Goldman Sachs. In other words, the traditional financial industry and investment bankers are making the money from the rise of a new world of mainly payment and retail financial actors.
This builds on my comments of yesterday, in terms of most challengers are challenging the bits that don’t make the most money. When Goldman Sachs can launch a retail bank (Marcus) and spend billions on marketing and subsidisation, it’s because their investment services make those billions. It’s hard to challenge that.
But, more importantly, if Buffett is backing companies like NuBank and PayTM – both of whom I’m a fan of – then you should watch were Buffett is investing or, rather, where Berkshire Hathaway are investing.
For example, the biggest FinTech start-up in the world is Stripe and yes, they are looking at an IPO too, with a valuation of $95 billion in March 2021. That makes them worth nearly the same as HSBC ... wow! Interestingly Buffett missed out on that one.
This doesn’t even mention crypto or bitcoin.
What strikes me is that the digital reconstruction of banking and finance is well under way. It does not necessarily replace traditional banking and finance, but it definitely replaces the parts of banking and finance that banking and finance do badly digitally.
When you have Square, PayPal and Stripe worth more than Goldman Sachs, Bank of America and HSBC, something is changing. And those guys are purely in the payments space. When you have NuBank and PayTM as some of the highest valued companies in South America and India, something is changing. When you eventually see FinTech firms that could do mergers and acquisitiosn and investment banking, something will be really changing.
Change? It’s the only constant.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...