Brazil’s Fintech decacorn, Nubank is all set for a blockbuster IPO on the 8th of December that’s certain to resonate across the world of finance. Whilst the company has been forced to cut its valuation target by around $9 billion to a total of around $41.5 billion, it’s unlikely that the Warren Buffett-backed venture will struggle to find investors.
As a result of its last-minute downsizing, Nubank is looking to sell 289.2 million shares at a price of between $8 to $9 each – down by around $2 from the original $10 to $11 bracket.
The revision to Nubank’s target came following the emergence of the omicron strain of Covid-19 and its impact on the confidence of global equities.
However, the downsizing of the IPO won’t hurt the scale of Nubank’s ambitions.
Even with a prospective valuation of $41.5bn, the company will still become the most valuable digital bank in the world – far outstripping European Fintech Revolut’s $33bn private valuation. Perhaps most significantly, Nubank will also become larger than Brazil’s biggest traditional bank, Itau Unibanco – which has a value of $37.5bn.
The scale of Nubank’s IPO, which is going live in a dual-listing in both Brazil and the US, is so large, that it’s expected to seamlessly slip into the United States’ top 10 flotations.
Nubank’s growth has accelerated in the wake of the pandemic. At the time of going public, it’s estimated that some 48 million users across Brazil, Mexico and Colombia use the company’s financial services which include zero-fee credit cards, savings accounts, personal loans, investment, and insurance options.
As we can see from the chart above, Nubank’s listing comes at a time of great investor confidence across the fintech landscape. In total, fintech VC funding has climbed to more than $30 billion in Q2 of 2021, whilst funding had never surpassed $10bn in any quarter prior to 2019.
With this in mind, it’s clear that Nubank enters a thriving market for fintech endeavors. The company itself raised $750 million in VC funding in June 2021 – delivering a valuation of $30 billion at the time. But are the blue skies above the fintech landscape set to stay clear forever?
Built-in Growth Potential
One of the issues that come packaged into a blockbuster IPO is an investor assumption that the company’s potential is already factored into its market price. However, Maxim Manturov, head of investment research at Freedom Finance Europe believes that the stock still has potential to grow – in spite of its sizable market cap.
“Overall, despite a potential valuation of more than $41.5bn, the company has growth potential. Latin America has a population of more than 650 million people, where a fairly high proportion of the population is unbanked, giving the company an opportunity to continue to grow at a high rate,” Manturov explained.
“On average, the company adds 2 million customers a month, which is quite high. Also, the bank’s addressable market is estimated to be $269bn by 2025. Given its leading market position, rapidly growing customer base, and introduction of new products the company will continue to grow its base and revenues at a rapid pace. In the long term, a purchase of Nubank shares may be attractive to retail investors,” he added.
Incorporating eCommerce
Despite its IPO, Nubank hasn’t stopped growing in terms of the services the company offers. In November, the fintech giant decided to team up with a range of retailers in order to build a thriving eCommerce section for its financial services platform.
The development will enable the bank’s customers across Brazil to shop at major online stores like AliExpress, Dafiti, and Magalu via the Nubank app – with more outlets set to become incorporated into the service over time.
The move to accommodate more eCommerce has enabled Nubank to add another string to its bow on top of personal lending, life insurance, entrepreneurial services, instant payments, and investment services.
“At Nubank, we’re constantly looking for ways to improve our customers’ lives by making experiences simpler and unlocking greater value for their money,” said David Vélez, Nubank CEO. “We have worked closely with our customers to understand their needs and pains, and how to build products to address them, creating a ‘Nubank standard quality’ of services that customers have been asking to go beyond financial solutions for years.”
“With this new offering, we are able to further provide these services in many other areas of their lives and make the overall experience more enriching and fulfilling,” Vélez added.
Although Nubank’s IPO has been downsized somewhat in the wake of its long-awaited blockbuster listing, the challenger bank has big potential and an ever-growing repertoire of financial services for customers.
The Fintech is all set to become the biggest of its kind when it comes to market, and the rest of the industry will be looking to the company as it shapes the future of finance.
Dmytro Spilka is a finance writer based in London. Founder of Solvid and Pridicto. His work has been published in Nasdaq, Kiplinger, Financial Express, VentureBeat and The Diplomat