Fintech’s IPOs
With the incoming listing on the capital market of some big tech, 2020 has been, and it keeps being, a fire year for IPOs. According to Refinitiv, a data provider, a dozen IPOs are set to raise an outstanding $6.8bn in the ending part of this year. So far, we have seen an unprecedented $3.6 billion’s IPO by Snowflake, a cloud software company, a $1.3 billion listing by Unity, the videogame software company that developed Pokémon Go and a $326 million IPO by Sumo Logic, a data software platform.
Furthermore, Palantir a data analytics company that became famous also for issuing counter-terrorism software for the US, debuted on September 30 on the New York Stock Exchange reaching a market value of $21bn after its IPO (source: WSJ). The business software company went public through a direct listing in which, unlike the traditional IPO, the company floats its existing shares on a public exchange and lets the market determine the price.
As you probably understood 2020 has been really kind to big tech’s IPOs and we can see this pattern also by just looking at the Renaissance Capital IPO’s ETF (ticker: IPO — ed.), up more than 50% since the beginning of the year.
Nevertheless, also some FinTech’s are riding this wave and, among those, we can find the Swedish start-up Klarna, the “buy now, pay later” company who received a record valuation by reaching $10.65bn after a $650mln round by the global technology investment firm Silver Lake, the Singapore’s sovereign wealth fund GIC, Blackrock, HMI Capital.
Klarna, whose among its investors has also the famous rapper Snoop Dogg, was already the most valuable private FinTech company in Europe and, despite Covid-19, it has rapidly expanded through the US (9 million customers in the US out of 90 million), increasing remarkably its revenues. Klarna offers an alternative payment method on e-commerce platforms: il allows users to buy immediately a product and pay it in 3–4 installments with 0% interest. Klarna’s gross merchandise volume (GMV), which is the value of transactions made using its payment platform, has risen to $22 billion in the first half of the year. These amazing numbers, together with the fact that the U.S. will soon become its largest market, are the main reasons behind the announcement that they will file for an initial public offering (IPO) within the next two years.
Furthermore, in Europe, Poland’s biggest e-commerce platform is preparing the country’s largest IPO, targeting a valuation between €10bn and €12bn. The listing might take place in October at the Warsaw stock exchange.
Allegro, that’s the name of the company, who now counts about 12.3m active users and around 117.000 merchants, it’s considering to expand the availability of goods delivered within one or two days and to increase its fintech activities to conquer a larger portion of the market.
For instance, the European company issued its “Allegro Mastercard” to its users, allowing them to pay bills and make purchases with it. Moreover, they also offer online mobile banking where customers can check their transactions, transfer money, cash paychecks and have other financial services.
Poland is a leader in digital payments but only 8% of the total retail market is online, that is why Allegro sees an opportunity for growth.
On the last July 2 the Insurtech start-up Lemonade, known for its home rental insurance tailored for young people, debuted on the New York Stock exchange with a valuation exceeding $3bn. The biggest shareholder is the Japanese multinational conglomerate holding company Soft Bank, followed by venture capital groups Sequoia Capital and Aleph.
The firm is now operating in the US and it has recently expanded its activity in Germany and The Netherlands. The peculiarity of this company is its capital-intensive business model of a “full-stack insurer”, meaning that Lemonade takes risk onto its balance sheet rather than passing it to more established insurers.
Then, last summer, Alibaba’s FinTech arm Ant Group (previously known as Ant Financial) announced its initial public offering on both Shanghai and Hong Kong stock exchanges and there all the cards for it to become the largest IPO of all time.
A Hong Kong listing will allow the company easier access to funds from high-risk, innovation-driven firms and to exploit the liquidity of foreign investors.
“Becoming a public company will enhance transparency to our stakeholders, including customers, business partners, employees, shareholders and regulators,” added executive chairman Eric Jing.
The company is targeting to reach between $200bn and $300bn of capitalization.
Mode, a company looking to achieve Alipay-like success in the UK, which aims to let consumers pay merchants directly from their bank account and manage sterling, euro and bitcoin all in one place, is set to debut on the London Stock Exchange in October. The small fintech company expects to raise at least £7.5M with shares priced at £0.50.
The new funds will be needed to fuel marketing expenses and new products such as an open banking payments solution and a rewards engine. Their goal, as it is very popular and important nowadays, is to become a “super app”
Finally, the African FinTech unicorn Interswitch was likely to debut, perhaps with a dual listing on the Lagos and London stock exchanges, in the first half of 2020, according to CEO Mitchel Elegbe. Anyway, the pandemic crisis delayed the firm’s IPO plans, leaving us without news.
Interswitch provides digital payment services across Africa, vesting an important role for the whole continent which is in majority unbanked (66% of Sub-Saharan Africa doesn’t own a bank account). Because of the potentiality of this industry, FinTech has become Africa’s highest-funded tech sector for VC.
In November 2019 Interswitch achieved a $1b unicorn valuation thanks to Visa $200m minority stake acquisition. Thanks to this financial services provider company, Nigeria has become the continent’s unofficial tech hub and fintech capital.
And you, what do you think are going to be some of the biggest FinTech’s IPO coming next?
Let us know in the comments section.
Bocconi Students Fintech Society
Author:
Sources:
1. https://www.ft.com/content/4f06079a-b229-47e4-bf51-0fa1799b8ed8
2. https://techcrunch.com/2020/09/15/klarna-raises-650-million-at-a-10-6-billion-valuation/
3. https://www.ft.com/content/c52d466b-40c2-4114-bfed-20dc54c8d97c
6. http://myallegro.com/how%20it%20works.html
7. https://www.ft.com/content/d6543228-94e6-49f6-b71b-4996578e6fc7
8. https://www.ft.com/content/a2738487-710f-4d8f-b7fd-819ccd7869dd
9. https://www.ft.com/content/0ede30bb-ef34-436e-89d5-f62a02b78aa0
10. https://www.fintechfutures.com/2020/09/fintech-mode-joins-hut-group-wave-with-london-ipo-listing/
11. https://techcrunch.com/2020/07/20/alibaba-ant-ipo/
12. https://www.ft.com/content/0d041652-c77f-4574-a813-3701b11dd031
13. https://techcrunch.com/2020/09/16/interswitch-to-revive-its-africa-venture-fund-ceo-confirms/
15. https://www.wsj.com/articles/palantir-asana-direct-listing-ipo-11601479305
