Nubank IPO: São Paulo fintech’s valuation would rank it over Itaú

Nubank has plenty going for it. The fast-growing Brazilian fintech counts billionaire Warren Buffett as an investor. It boasts more than 48m customers and was most recently valued at $30bn in its last private funding round in June.

But Nubank’s hopes of securing a two-third jump in valuation in just under six months was always going to be a stretch. The lossmaking digital lender on Tuesday downsized its planned initial public offering, slashing $10bn from its hoped-for valuation of over $50bn. At the top end of the new price range, it will raise $2.6bn at a valuation of $41.5bn.

That is still steep and would make Nubank worth more than the country’s top lender, Itaú Unibanco. The message for other Latin American tech start-ups that are looking to go public is clear: investors will not simply buy anything at any price.

São Paulo-based Nubank hoped to ride the IPO boom that has already raised a record $275bn in the US this year. But since filing for its IPO at the start of November conditions have weakened. Treasury yields have risen. Some high-profile new issues like Paytm in India have flopped. A new coronavirus variant has emerged.

The outlook for Brazil — set to hold presidential elections in 2022 — has also darkened. The continent’s biggest economy is expected to expand just 0.6 per cent next year. 

The growth potential remains. Brazil’s banking industry is one of the world’s most lucrative. Returns on equity averaged 20 per cent from 2018 to 2020. That compares with 10 per cent in the US and 5 per cent in the UK.

Nubank’s zero-fee credit card and easy-to-use mobile app have helped it amass a following. Users and turnover have rocketed. Revenues doubled to $1.1bn in the first nine months of this year, though net losses widened to $99.1m. Customer deposits now stand at $8.1bn.

At 56 times trailing revenue, Nubank’s new valuation target will still be a tough sell. Do not be surprised if Nubank has to give its IPO another haircut.


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