Latin America’s largest neobank and one of the region’s biggest credit card issuers, Nubank is about to debut on New York Stock Exchange (NYSE). On Wednesday, a day before its U.S. IPO, the market set the prices for Nu Holdings (NU) shares at $9, as first reported by the Brazilian business news website Pipeline – precisely the upper end of the range expected by the company, which makes Nubank the most valuable listed Latin American bank. The U.S. IPO will happen only a day before the debut of the company’s BDRs (assets representing on the Brazilian stock exchange the shares of a company listed on a foreign stock exchange) on B3.
According to Nubank itself, affiliates of Sequoia Capital, Tiger Global Management, SoftBank Latin America Funds, Dragoneer, TCV, Sands Capital, Morgan Stanley, and JPMorgan are expected to anchor the IPO and buy shares worth at least $1.3 billion.
At the end of November, Nubank slashed its IPO valuation target to roughly $40 billion, as a recent global sell-off in technology stocks weighs on year-end initial public offerings. Backed by Warren Buffett‘s Berkshire Hathaway, the company had earlier planned to raise nearly $3 billion by selling its 289.2 mln shares priced between $10 and $11 apiece. Now, with the prices ranging between $8 and $9, it would raise $2.6 billion, racing a valuation of $41.5 billion. These values can still go up if the company decides, together with the banks responsible for the operation (Morgan Stanley, Goldman Sachs, and Citi), to allocate the additional and supplementary lots.
For the company’s BDRs to be traded on B3 on Friday, and which price correspond to 1/6 of the share value, the price range is between BRL 7,45 and BRL 8,38.
The digital bank’s planned stock market float comes on the heels of several notable U.S. IPOs in 2021, including fintech heavyweights like Robinhood and Coinbase. Investors, however, have been wary of backing Latin American fintech companies after Brazilian payments firm StoneCo posted hefty losses in its most recent quarterly results – StoneCo shares have declined almost 80% this year.
The global backdrop of high inflation and higher interest rates, along with the emergence of the new coronavirus variant, Ômicron, have also helped to heighten market concerns in recent weeks.
But if there’s a company that could face such turmoil, it’s Nubank – the news about Pfizer/BioNTech vaccine being effective against the new variant after three shots came just in time to help calm the market’s nerves. The neobank has over 48.1 million customers (almost ten times it had three years ago), most of them in Brazil, and it has already started operating in Mexico and Colombia, signaling that its hunger for Latin American markets is big.
At the beginning of 2021, Nu México – Brazil’s neobank Nubank subsidiary in Mexico – announced an investment of US$ 135 million to boost Nu’s growth in México, primarily by scaling its local presence at a faster pace. This market is strategic for the company since it represents 20% of the population of Latin America, and according to INEGI figures, only 47% of its population is banked.
Additionally, the company reported that it has 35.1 million monthly active users (73% of its clientele), which gives Nubank several other possibilities of business diversification.
Fueled by rounds of multi-million investments, Nubank has bought seven companies since 2020 to speed its growth beyond its organic possibilities. Last year, it acquired Easynvest (a digital broker), Cognitect (a software engineering company), and Plataformatec (a consulting firm focused on product development and management). And in 2021, the company bought Juntos (a platform that provides automated and personalized proactive conversations between banks and their clients), Spin Pay (an instant payments fintech), and Olivia (an artificial intelligence fintech).
These acquisitions are key for the neobank’s portfolio expansion strategy. Throughout this year, Nubank launched a marketplace within its app and added a string of new financial products, such as investments, personal loans, and insurance. It also announced partnerships to offer services that it does not provide itself yet, with companies such as Remessa Online, a Brazilian fintech that provides international transfers, and the collaboration with Creditas, for loans with vehicle collateral.
Despite its growth, Nubank is not profitable – because it doesn’t want to be. In 2020, Nubank posted a total annual revenue of over BRL 4 billion ($737 million), a 20% Y-o-Y increase, and a net loss of BRL 230 million. This year, until September, the neobank recorded a net loss of BRL 528 million ($94 million). Nubank is constantly focusing its resources towards growing its market share in a booming industry that is still far from being consolidated. Can the IPO – and a less patient market with money-burning startups – change that? It’s too early to know.