Nubank raised US$ 2.6 billion in a New York Stock Exchange IPO on Wednesday, in a deal that is set to drive further global interest in Latin America’s booming fintech market.
Nu Holdings has sold 289.15 million shares at US$9 each, the company announced in a statement on Wednesday. The price comes at the top end of a pricing range that was revised lower last week amid weaker investor demand.
This transaction is not just a landmark for Nubank and its investors and clients – as the first major IPO from a Brazilian neobank, it also highlights the huge potential that exists in Latin America’s fintech industry. Here’s what we can learn from the Nubank IPO.
Nubank IPO: a ‘milestone’ for fintech
Nubank’s IPO is attracting global attention to Latin America’s fintech industry and shows a route to success for retail financial services.
“It’s an important milestone for the fintech revolution,” Jorge Gonzalez, general partner at G2 Momentum Capital, a Mexican seed-stage fund, told iupana recently.
“Entirely digital financial proposals are going to continue to grow and will prevail because they understand the needs of users and are solving them in a convenient way,” he added.
Nubank’s filing also gave the market its first glimpse of the neobank’s financials: it has around 48 million users and while it achieved US$1.06 billion in revenue between January and September of this year, it posted a loss of US$99.1 million.
“Obviously it opens investors’ eyes to the possibilities for these types of companies,” said Gonzalez. “It’s also a lesson for banks: what we have to do is get closer to the customer and be digital,” he added.
Beyond banking: Nubank’s strategy
Nubank began as a Brazilian challenger bank, but has recently made several forays into new markets and business areas. Nubank reported a financial profit for the first time in the first half of this year in its Brazilian operations, with BRL76m (US$13.7m) net income in the first half of 2021. The same time last year, the company lost BRL 95m. The earnings did not include Nubank’s operations in Colombia or Mexico.
Nubank’s recent moves into new business areas and markets include:
- E-commerce: Nubank bought e-commerce player SpinPay in September and made its e-commerce debut in partnership with platforms including Chinese giant AliExpress in November.
- Wealthtech: Nubank bought EasyInvest in September 2020 and has since built out its own retail investment operations.
- New hires: Nubank hired Sandro Manteiga, COO of operations at PicPay, to be vice president of operations. Manteiga worked at institutions such as Itaú Unibanco and Deutsche Bank before joining PicPay a year ago.
- Acquisitions: Nubank has been highly acquisitive in the past two years. In July 202, it acquired Cognitect, a US software consultancy, as well as the Datomic database, in an effort to improve the growth and scalability of its products. In September this year, it agreed to buy 7.7% of Brazilian digital lender Creditas.
- Mexico growth: Nubank launched in Mexico early last year, with plans to replicate its Brazil success in the North American market. It struck a deal to buy Mexican microfinance lender Akala in September this year. With the purchase of a regulated entity, the firm expands in traditional banking activities and will be able to offer – for the first time – savings products in the Mexican market.
- Colombia growth: Nubank announced its launch in Colombia a year ago, beginning to offer physical and digital cards.
- Investments: Nubank has captured major investment this year. It raised a US$ 400m Series G round in January, and then tapped Berkshire Hathaway for a further US$ 500m in June.
Nubank IPO: The details
Nubank sold 289 million Class A shares at US$ 9 each.
The Nubank stocks will be split between Class A shares on the New York Stock Exchange and Brazilian Depositary Receipts (BDRs) on the Sao Paulo Stock Exchange (B3). Six Nubank BDRs are equivalent to one Class A share traded on the NYSE.
Nubank’s shares will trade on the NYSE under the ticker “NU”.
Nubank’s BDRs will trade on the Sao Paulo Stock Exchange (B3) under the ticker “NUBR33”.
Morgan Stanley, Goldman Sachs, Citi, NuInvest, Allen & Company, HSBC and UBS are global coordinators on the NYSE listing.
Who invested in the Nubank IPO?
Funds from Seqouia Capital, Tiger Global, Softbank Latin America, and Dragoneer are among a handful of anchor investors who, ahead of the deal, said they would invest a combined US$1.3 billion in the listing.
In Brazil, Nubank is distributing 20 million BDRs to clients of the digital bank for free. Recipients will have to hold these “little pieces of Nu” for at least 12 months before they can be traded.
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