5 FinTech IPOs of 2021 You Don’t Want to Miss
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors, which is a big step for a company as it facilitates the ability to raise a lot more money. With that being said, here are five of the most exciting FinTech IPOs of this year!
Robinhood
The most universally recognized IPO in FinTech for 2021 hands down belongs to Robinhood, the Unicorn valued at around $55B. Robinhood has had a successful IPO showing even after a PR crisis as the company infamously stopped allowing users of their app to buy stock in GameStop, along with some other stocks. This is widely seen as the company manipulating the market in order to protect large companies at the expense of their users.
Business Model
There are many brokerage apps to choose from, but what makes Robinhood so competitively stable is the young demographic it appeals to. Generation Z and Millennials have grown up in an age where the screen, specifically the one on smartphones, commands our attention unlike any invention that came before it. Therefore, this target market casts a wide net that will most likely feed into the next generation. The app UI is also very easy and seamless to use for young, inexperienced retail investors who want to dip their toes into the stock market. In that regard, it succeeds miles beyond its competition.
What analysts are saying
On July 28, Robinhood priced 55 million shares at $38 a share, raising $2.1 billion. But the pricing came in at the low end of its expected range. Shares are far from their post-IPO highs and there is no current buy point. These same investors would thus recommend potential investors the stock to form its first base, which would offer an initial buy point.
Affirm
The average American household has around $6000 in credit card debt, and credit card companies have been accused of unethical practices to attract customers. Founded by Max Levchin, Affirm is purported to challenge this industry by offering flexible, transparent, and convenient ways to pay for purchases over time using Point-of-Sale financing through installment loans.
Business Model
The company offers three, six, or twelve-month repayment terms at checkout, which can vary based on the size of the purchase; some purchases may also require a down payment amount due at checkout. These payments don’t carry any hidden fees, including prepayment, late payment, or account closure.
What analysts are saying
2020 saw Affrim’s revenue grow by $4.6B, around 77%. While they are a leader in the “Buy Now Pay Later” space, Affirm does have some risks; it’s a capital intensive business, margins are lower and the valuation multiple is likely to be very high for what could be perceived as a traditional lending business.
Coinbase
Coinbase is the biggest crypto exchange in the US market and offers a wallet, new updates, and merchant tools within a simple interface.
Business Model
They receive revenue from transaction fees and from subscriptions and services. Many crypto exchanges on the market are geared towards institutional investors. Coinbase borrows a page from Robinhood’s book by targeting beginner investors and teaching and informing them about crypto in the process.
What analysts are saying
While Coinbase has notably impressive metrics such as its high liquidity rate and 100%+ year-over-year revenue growth, the company has some very clear risks. Coinbase’s success is tied to the crypto assets underlining its platform and is subject to backlash from SEC regulations as more public policy on cryptocurrency becomes developed. They also face competition from the entry of Central Bank Digital Currencies (CBDCs (Digital currencies backed by central governments)), brokerage apps that allow you to invest in crypto assets (such as Square and Robinhood), and they even face competition from traditional Investment Banks.
Blend
Blend is a digital lending platform that supports and simplifies applications for mortgages, consumer loans, and deposit accounts.
Business Model
Blend operates as a SaaS (software as a service), and its top 5 customers make up about 34% of its revenue. It operates mainly as a software company that enables the mortgage process as an infrastructure layer and is not the one offering the mortgages.
What analysts are saying
Blend revealed that its revenue had climbed to $96 million in 2020 from $50.7 million in 2019. Meanwhile, its net loss narrowed from $81.5 million in 2019 to $74.6 million in 2020. The company had said it expects its revenue growth rate “to decline in future periods.” It also doesn’t envision achieving profitability anytime soon as it continues to focus on growth.
SoFi
So-Fi (Social Financing) offers a suite of financial products through its platform, a one-stop-shop app. The company’s three major business segments include lending, a technology platform, and financial services.
Business Model
SoFi’s lending services include student loan refinancing, personal and home loans, while its technology platform, Galileo, provides services, including an authorization API to financial and non-financial institutions. In this way, SoFi is able to gain profit through various revenue streams.
What analysts are saying
In Q1, the company posted adjusted net revenues of $216 million, while the company had guided for revenues ranging between $190 million and $195 million. SoFi reported adjusted EBITDA of $4 million. Students enrolled in four-year undergraduate programs make up the largest piece of SOFI’s student lending revenues and market opportunity. The average SoFi Technologies price target of $27.50 implies approximately 52.1% upside potential to current levels.
