Nubank has scaled back its planned initial public offering in New York, with the Brazilian fintech backed by Warren Buffett now targeting a valuation about $9bn lower than originally outlined.
The lossmaking digital lender said on Tuesday that it was looking to sell shares at between $8-$9 each, down from an earlier bracket of $10 to $11.
If the top end of its new price range is achieved, Latin America’s most valuable start-up will raise $2.6bn, with an implied market capitalisation of $41.5bn — short of the $50bn-plus valuation previously targeted.
However, even this would still be higher than that of Brazil’s biggest traditional lender, Itaú Unibanco. Nubank is expected to rank among the top-10 US flotations in what has been a record-breaking year. Nearly $300bn in proceeds have been raised in the US in 2021 for IPOs including those by special purpose acquisition companies, according to data from Dealogic.
The decision to trim the pricing by Nu Holdings, the group’s Cayman Islands controlling entity, came as global equities tumbled on fears about the new Omicron variant of coronavirus. It also follows the flop of Indian fintech Paytm’s IPO — the biggest in the Asian nation’s history — whose shares fell by more than a quarter on its trading debut this month.
Founded in 2013, Nubank began by offering zero-fee credit cards and has moved into savings accounts, personal loans, investments and insurance. It has more than 48m users across Brazil, Mexico and Colombia.
Buffett’s Berkshire Hathaway invested $500m in a funding round earlier this year that valued the group at $30bn.
Nubank said that a number of cornerstone investors, including Japan’s SoftBank, had indicated an interest in purchasing at least $1.3bn worth of stock in the IPO. The company plans to sell 289.2m shares, with an overallotment option of 28.6m. The lead underwriters are Morgan Stanley, Goldman Sachs, Citigroup and NuInvest.
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Nubank is credited with disrupting a banking sector in Brazil dominated by a handful of players that traditionally charged for basic services, while leaving millions of people excluded.
The São Paulo-based group’s revenues doubled to $1.06bn in the first nine months of 2021, though its net losses widened to $99.1m in the same period compared with $64.4m a year earlier. It recently said it turned a half-year profit in its homeland.
Alberto Amparo, investment analyst at Suno Research, said the fintech still had “challenges to monetise the client base”.
“At the new valuation of [about] $40bn there are still expectations of huge growth in earnings priced in,” he added.
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