Nubank, a Brazilian digital bank (fintech) startup, Nu Holdings cut the targeted price range for its the United States stock market floatation by nearly 18% on November 30. The decision was made after a recent global sell-off in technology stocks weighed on year-end initial public offerings (IPOs).
The firm, referred to as Nubank, had earlier targeted an IPO valuation of over $50 billion on the back of a majorly record-breaking boom in the United States capital markets. However, a recent surge in Treasury yields has now dampened investor sentiment towards most of the major tech stocks, while the new COVID 19 variant Omicron has increased fears of new damage from the over a year-long pandemic.
In a newly amended filing with the United States securities regulator, the Sao Paulo-based Nubank stated that it now aims to sell nearly 289.2 million shares priced at between $8 and $9 each. Interestingly, at the top end of the range, it is set to raise $2.6 billion at a valuation of $41.5 billion.
Affiliates of SoftBank Latin America Funds, Sequoia Capital, Sands Capital, Morgan Stanley, Tiger Global Management, Dragoneer Investments, TCV, and JPMorgan are anticipated to anchor the IPO and acquire shares worth over $1.3 billion.
Underpinned by Warren Buffett’s Berkshire Hathaway Inc, the firm had earlier planned to raise around $3 billion by selling shares that are priced between $10 and $11 per share. Even at the new lowered target valuation, Nubank might be worth more than Brazil’s biggest traditional lender Itau Unibanco Holding SA (ITUB4.SA) that has a market cap of around $37.5 billion.
The digital bank’s planned stock market float has come on the heels of multiple massive IPOs in 2021, including those of Coupang Inc, Didi Global Inc (DIDI.N), Rivian Automotive, and other fintech heavyweights like Coinbase Inc and Robinhood Markets Inc.
United States IPOs have raised a staggering haul of $275 billion in 2021 from the investors, based on data acquired from Dealogic. But, investors have been wary of backing Latin American fintech firms with unknown and questionable business models after StoneCo, a Brazilian payments company, posted huge losses in its recent quarterly results. StoneCo shares have lost 80% of their value in 2021.
Nubank was launched in 2013 by David Velez, who is a Stanford-educated Colombian. The firm started as an issuer of credit cards that charged no yearly fee. Since then, the bank has gained at least 48 million clients and launched an assortment of products like checking accounts and different loans.
This institution mainly makes money via fees that are paid by the merchants whenever a client makes a transaction. The firm said in October that it had managed to turn some profit in the first half of this year in its Brazilian operations.
Goldman Sachs, Morgan Stanley, NuInvest, and Citigroup are the lead underwriters of this bank’s offering.