Brazil's Nubank downsizes IPO on tech stock slump
By Daniel Tyson
16:29, 1 December 2021
One of Latin America’s largest financial technology companies slashed its initial public offering (IPO) 18% to a proposed maximum of $41.7bn Tuesday as a recent sell-off of technology stocks triggered by the prospects of higher interest rates and a renewed focus on future cash flows bogs down end-of-year IPOs.
The firm plans to trade on the New York Stock Exchange under the symbol “NU” and in Brazil under the symbol “NUBR33”.
Brazil-based Nubank’s initial US Securities and Exchange Commission's paperwork stated the fintech aimed for an IPO valuation of approximately $50.6bn.
Lower price target
Current market conditions led Nubank to reduce its price range to $8–$9 per share, down from its original aim of $10–$11 per share. The new IPO of 289 million shares could raise $2.6bn, according to the amended paperwork.
"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," the San Paulo-based company explained on its blog.
The firm plans to use proceeds from the offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. A portion may also be used for mergers and acquisitions.
Revenues almost double, net loss widens
Nubank reported revenue of $1.1bn for the nine months ended 30 September, almost double the $534.6m for comparable nine-month period in 2020.
The net loss was $99.1m, or $0.07 per share, up from $64.4m, or $0.05 per share.
Founding shareholder and chief executive David Vélez Osorno will beneficially own 86.2% of the outstanding Class B ordinary shares after this offering, which will represent approximately 75.0% of the voting power of the issued share capital.
Rising Treasury yields give investors pause
Technology IPOs have been punched hard recently as Treasury yields rise, giving some investors second thoughts about technology stocks. Additionally, the Covid-19 Omicron variant has increased fear among investors. Nubank’s offering comes after a number of large US fintech IPOs, including Robinhood Market and Coinbase.
Affiliates of Sequoia Capital, Tiger Global Management, SoftBank Latin America Funds, Dragoneer, TCV, Baillie Gifford Overseas, Sands Capital, Invesco, Morgan Stanley and JPMorgan are expected to anchor the IPO and buy Class A shares worth at least $1.3bn, Nubank said.
Despite its lower valuation, Nubank would still be richer than Brazil’s leading traditional lender, Itau Unibanco Holdings SA. The bank has a $37.5bn market capitalisation.
Morgan Stanley, Goldman Sachs, Citigroup and NuInvest are the lead bookmakers for Nubank's offering.
Nubank is one of the world’s largest digital banking platforms with 48.1 million customers across Brazil, Mexico and Colombia as of 30 September, up 62% year over year. Monthly active customers were 35.3 million, up 73%. Monthly average customer revenue was $4.10.
Read more: Nubank seeks bn IPO serving Latin America's underbanked