Where's The Exit? - 2021 FinTech Public Listing Trends
Updated: Jan 17
The past year was bigger, better and bolder for the fintech sector. Startups and firms at all levels observed remarkable growth across segments, geographies and business models. Several fintech behemoths went public in 2021 and an overwhelming majority of them chose to do so before turning profitable! With this momentum, choosing the most suitable exit strategy becomes the next task at hand. We looked at M&A as one of the exit strategies that was on full display in the FinTech sector — now, here’s a roundup of the exit strategy trends that we witnessed in 2021.
The year 2021 saw the rise of many companies going public through listing methods—from Initial Public Offerings (IPO), Direct Listings, and the hot new trend of going public via Special Purpose Acquisition Companies (SPAC). However, profitability still eludes a majority of these FinTechs who chose to go public before achieving a positive bottom line. Public markets have been skeptical of their path to profitability due to the prevalent uncertainty surrounding it, which has correspondingly resulted in stock prices being in red for most of the year.
With this blog, we look at the biggest FinTech public listing headlines of 2021 through three varied lenses that determine their rise and fall:
FinTechs In Freefall: More Than 50% Valuation Fall
Several FinTechs who went public in 2021, witnessed a massive correction in their share prices and corresponding private market valuations – Oscar Health, MoneyLion, Blend, Robinhood, and Remitly have lost over half of their listing valuations during 2021.
Oscar Health – a tech-enabled medical insurance provider backed by Fidelity, Alphabet, and Tiger Global – went public in March and raised $1.2 billion. Post-IPO, the stock had a freefall in the next 2 months and went down nearly 50% from the IPO price. By the end of 2021, Oscar Health had lost almost 80% of its listing valuation.
MoneyLion, a digital bank backed by Blackrock and Edison Partners, that went public through a SPAC, is another story of massive devaluation after listing. The neobank has squandered its unicorn status as well by losing over 70% of its listing valuation.
Robinhood, the online trading platform backed by Sequoia Capital, Ribbit Capital, and a16z, went the unconventional route of direct listing and has lost half of its listing valuation of $32B amidst multiple controversies surrounding the company.
FinTechs On A Bumpy Ride: Up to 30% Valuation Fall
Amongst those who went through some bumps in order to sustain their numbers in the market, the names of Kakao Pay, Coinbase, PayTM, Wise, and Nubank comprise the notable ones.
South Korea’s biggest digital payments platform Kakao Pay, backed by Jack Ma’s Ant Group, raised $1.28B when it made its public debut in June. However, owing to increased scrutiny by South Korean regulators, the startup lost over 6% since its IPO and is presently valued at about $18B.
Coinbase, the largest cryptocurrency exchange in the USA, after its direct listing on NASDAQ in April, was briefly worth as much as $100M and became the 7th biggest US listing of all time. However, since its Q3 earnings, Coinbase shares dipped by more than 7% in November as the exchange failed to meet forecasted results. By the end of the year, it lost almost 30% of its listing valuation.
Wise became the first-ever direct listing of a tech company on the London Stock Exchange when it made its public debut in July. In October, Wise slipped below its listing price for the first time ever, when co-founder Taavet Hinrikus offloaded 81.5 million pounds ($112 million) of stock at a discount. Overall, Wise lost 2% of its IPO valuation by the end of 2022.
Warren Buffet-backed Brazilian FinTech Nubank became Latin America’s biggest bank by market capitalization after its NYSE debut in December. However, it has lost more than 13% of its IPO valuation since listing and is presently valued at about $45B.
Indian FinTech PayTM had a nightmare debut where it began trading at a 9% discount than the initial issue price, and by the end of the year had lost over 22% of its listing valuation.
Rising and Shining FinTech: Valuation Heads North
It hasn’t been all rain and gloom for flourishing FinTechs in the public domain. Many diverse players—such as Kakao Bank, Affirm, and SoFi—landed some wondrous deals to help expand their respective businesses and have been performing positively for their shareholders.
Kakao Bank, Asia’s first purely digital lender to go public, became South Korea’s biggest lender by market value after its blockbuster public debut in August. Its shares more than doubled in their trading debut, and towards the end of 2021, it had gained over 7% on its IPO valuation.
Having raised $1.15B with its NASDAQ debut in January 2021, Affirm shares soared 98% on the day of listing, highlighting the potential of the BNPL industry. After a downward and sideways slump, in October, its shares jumped by almost 20% as it announced its partnership with retail chain Target. Owing to an increase in gross merchandise volume and expansion in relationship with Amazon, Affirm gained almost 27% on its listing valuation and is presently valued at about $26B.
FinTech startup SoFi, backed by venture capital investor Chamath Palihapitiya, made its public debut in June via a SPAC deal with blank check company Social Capital Hedosophia Holdings V. Owing to a stellar Q3 from SoFi’s lending division, it made an almost 40% jump from its IPO valuation, and is presently valued at about $12.5B.
The public listing exit journey comes with its fair share of ups and downs that have to be identified and carefully considered by companies and investors before stepping into the public eye. With increased scrutiny and accountability, the strategic move which may seem all glamorous can be a hit or a miss for new-age businesses that are paving the way for innovation in their respective domains.
However, what can't be denied is the maturity stage that many FinTech startups are approaching and the increasing number of industry favorites that will be going public in the coming years. These companies are also changing the trends in public listing by opting for lesser-known, but more efficient methods like direct listing or SPAC listing. Like the mega-banks and technology empires that have become industry representatives on the bourses, the stronghold of FinTech startups carving a place in the public markets grows bigger day by day.
(Disclaimer: This is not an investment advice. The article may contain secondary links on clients and partners. However these partnerships do not influence editorial content.)