By any stretch of the imagination, for the FinTech IPO Index, the last 12 months have been largely kind.
Headed into 2025, the index was up more than 58% through the previous year, far outpacing the Nasdaq’s 28.6% advance through the same period.
With those gains in the rearview mirror, the question remains: What’s next? In an environment where volatility is the norm — most of our names (33 out of 45) trade still below their initial public offering (IPO) prices — profits and platforms may matter to the Street more than ever in the next 12 months.
To be sure, there are some high-profile IPOs on the horizon, which may perk up interest in FinTechs, and move investors to “kick the tires” on names that are already publicly traded and have a bit of history behind them. Chime has submitted a confidential filing that opens the door to a public listing this year. Klarna is readying for its own debut, too, as noted here. Stripe is reported to be eyeing an IPO, too. Klarna’s recent reported valuations reveal the volatility inherent in the FinTech realm: The recent $14 billion plus valuation of the buy now, pay later (BNPL) provider is well above the nadir of $6.7 billion seen in 2022 but is significantly below the $45.6 billion of 2021, when a raft of FinTech IPOs (including 27 names in our index) came to market.
Momentum may be on the side of FinTechs in the current year. First there’s the momentum of the overall markets, which may be readying for the incoming presidential administration, which some investors and executives expect to be arguably “business friendly” in terms of regulations, crypto and taxes (which, of course, impact profits, and profits in turn impact valuations).
Beyond that, interest rates are well off their peaks. Interest rates represent a hurdle of sorts for investing, as returns above what can be “earned” simply by lending capital are lures to investing in companies themselves (and buying equities). Lower interest rates also may spur more activity on lending platforms such as Upstart.
And 2024 was notable for the FinTech IPO Index due to acquisitions. Nuvei went private, and in a $6.3 billion deal became a wholly owned subsidiary of PE firm Advent International. At the time of announcement, the deal represented a 56% premium to Nuvei’s trading price. Elsewhere, and just last month, MoneyLion entered a definitive agreement to be acquired by Gen Digital for $1 billion (investors seemingly had been anticipating such a corporate action, as shares were trading at or above the $82 per share level into the announcement).
The two deals — both of them bids for platform companies, where Nuvei has been focused on payment processing and MoneyLion’s been building out a financial services ecosystem — represent what might be on investors’ radars. Platforms are extensible and can be broadened to include new services and products, and can, with enough scale, become global. BILL.com’s up roughly 136% since its IPO, and as PYMNTS has reported, has been announcing new capabilities aimed at modernizing and streamlining B2B and corporate back office processes and payments. BNPL, perhaps no surprise, has been a standout for the past several months, as noted by PYMNTS Intelligence research and by the fact that Sezzle is now nearly 235% above its offer price.
For quickly growing corporates, investors tend to look at multiple such as price to sales, and whether EBITDA, a rough measure of cash flow (and thus operating, not net profits) are positive. The average price-to-sales ratio across our universe of coverage stands at 5.6, versus a roughly 5.8 multiple as estimated by sites such as macrotrends. It took a while, but on at least some metrics, FinTech valuations are moving more in line with their benchmarks … which might spur some more acquisitions, as venture capital becomes more consolidated and areas “other” than artificial intelligence (AI) gain attention.
The old investment disclaimer is that “past performance does not guarantee future results,” but for the FinTech IPO Index, there are some real tailwinds in place.
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