Since November 1, Nubank has prepared to go public in the New York Stock Exchange (NYSE). However, after one month, the forecast for its valuation has dropped dramatically. Nubank was targeting a market cap of more than $50 B for its IPO in the United States. However, the last valuation target is $41.8 B. Despite the slash, the market capitalization forecasted would make the digital bank more valuable than the largest Brazilian bank, Itaú Unibanco, which currently has a market value of more than $38 billion.
Nubank targeting $50 B
In a document to the regulator on Monday 1, Nubank said it planned to sell about 289 million shares to raise another $3 billion in its IPO. Fintech has set a price range between $10 and $11 per share. According to the company, between BRL 180 million and BRL 225 million will be used to purchase BDRs for customers.
In its most recent document, Nubank has opened its finances for the first time, revealing a huge leap in growth – its revenue has nearly doubled to $1.06 billion in the nine months ended Sept. 30. The loss in the same period, however, increased from 64.4 million to 99.1 million dollars.
Slashing the valuation
After one month, Nubank slashed the initial target valuation a 25% to roughly $40 billion. The change has been caused to a recent rise in Treasury yields, according to Reuters. Investors dampened their sentiments to the tech sector. Meanwhile, the new Omicron variant has renewed the fears of the pandemic.
In a statement on its blog, Nubank said it decided to trim its price range to align with current market conditions. “Our focus is and has always been in the long term. For this reason, we sought to set a price range in line with markets at this moment.”
In an amended filing with the U.S. securities regulator, Sao Paulo-based Nubank said it now planned to sell about 289.2 million shares priced between $8 and $9 each. At the top end of the range, it would raise $2.6 billion at a valuation of $41.5 billion.
Nubank is in the NYSE
Nubank will list its shares on the New York Stock Exchange under the symbol “NU” and its BDRs under the symbol “NUBR33”. Traded on the B3, the São Paulo Stock Exchange, the BDR stands for Brazilian Depositary Receipt (Certificate of Deposit of Shares, in Portuguese). An asset is a security that represents shares issued by companies in other countries.
At that size, the IPO will rank as one of the biggest of the year in the United States, alongside offers from e-commerce company Coupang, Chinese app transport company Didi Global and chipmaker GlobalFoundries.
Sao Paulo-based fintech, which was last valued at $30 billion after a financing round led by Warren Buffett’s Berkshire Hathaway, is expected to list its shares by year-end.
Model business of Nubank
Nubank primarily earns money through fees paid by merchants whenever a customer makes a transaction. In October, fintech said it managed to make a profit in the first half of 2021 in its operations in Brazil.
Founded in 2013 by David Vélez, a Colombian who studied at Stanford, Nubank started out as a credit card issuer that did not charge any annual fees. Since then, the bank has gained more than 48 million customers and launched products, including checking accounts and loans.
Softbank backed Nubank and the Brazilian bank has expanded to other countries of Latin America such as Argentina, Colombia, and Mexico.
After the IPO, co-founders Vélez, Cristina Junqueira, and Adam Edward Wible will hold 87% of the voting power and 25% of the company’s outstanding shares, as long as underwriters do not exercise the so-called “greenshoe”, which allows companies to sell shares. additional payments to buyers during an IPO.
Morgan Stanley, Goldman Sachs, Citigroup, and NuInvest are the main coordinators of the offering.