One of the biggest topics at Money20/20, the financial technology conference that attracted roughly 2,300 fintechs to Las Vegas last month, was which company will go public next.
This year is expected to be a groundbreaking moment for initial public offerings. Roughly 914 companies have gone public, raising $293 billion, as of Nov. 12, according to Dealogic. The 914 is more than double the 353 firms that collected about $132.2 billion for the same time in 2020. (Of the 914 IPOs this year, about 59%, or 540, are special purpose acquisition companies or SPACS.)
Fintechs, which are part of the technology sector, represent a small chunk of the IPO market. So far in 2021, just 19 U.S. financial technology firms have gone public, raising $10.5 billion, Dealogic said. This is nearly quadruple the five financial services companies that listed their shares in 2020.
Some of the biggest names to go public this year have been fintechs. For example,
Robinhood Markets
(ticker: HOOD), the trading website that transformed the brokerage industry, made its market debut in July after raising $2.25 billion.
Marqeta
(MQ), a payments processor, rose 13% during its first day in June.
Affirm Holdings
(AFRM), which offers a buy-now-pay-later option, listed in January, with shares rising nearly 96%. Stripe, the online payment processor, is expected to go public next year using a direct listing, according to press reports.
The surge of fintechs going public is part of an overall trend in the new issues market, said Andrew Wetenhall, co-head of equity capital markets for the Americas at
Morgan Stanley
(MS). The investment bank has worked on some of the most popular fintech IPOs including Affirm, restaurant software company Toast (TOST), insurtech
Lemonade
(LMND), and payments processor
Square
(SQ).
High growth companies that access the IPO market are generally out of the venture capital stage and are sufficiently established to generate broad investor interest, Wetenhall said. These companies are getting attractive deals in the public markets and usually at stronger valuations than in the private markets, he said.
“The IPO market is providing compelling valuations for high growth companies,” he said.
One fintech that is heading toward a traditional IPO is Nium, a six-year old start-up that is considered to be a competitor to the much bigger Stripe. Nium plans to speak to investment banks next year about its offering, according to co-founder and CEO Prajit Nanu. “We should go public in 18 months to be more precise,” Nanu told Barron’s from the sidelines of Money20/20.
An IPO will help spearhead Nium’s M&A strategy, he said. “As a public company, it’s easier to deal with regulators,” he said. The Singapore company has been acquisitive; in July, the start-up agreed to acquire Wirecard Forex India Pte, a foreign-currency exchange. It closed its buy of Ixaris, a travel payment provider from the U.K., in August. Nium is expected to do another deal in six months and is looking at card acceptance, Nanu said.
Begun in 2014 as InstaRem but rebranded as Nium in 2019, the company helps ease the regulatory burden of payments by providing an API that lets businesses and banks accept payments in 63 currencies from more than 100 countries. It plans to further expand in markets like Latin America and Africa, Nanu said. Nium has raised about $300 million in funding, including a $200 million round in July that valued the fintech at $1.1 billion.
In late October, Nium launched a global Crypto-as-a-Service, or CaaS, solution for financial institutions that will let them integrate popular crypto capabilities into their financial applications. This includes the ability to buy, sell, and hold digital assets, a spokeswoman said.
“We want to be the Netflix of the financial industry. We want to have our foot in crypto,” Nanu said.
Yieldstreet, which seeks to even the playing field for retail investors, is also looking toward the public market. Founded in 2015, the New York fintech provides a platform that gives retail investors access to alternatives, like private equity and hedge funds, that were previously reserved for institutions and the ultra wealthy. The start-up lets its customers invest in art, real estate, marine and commercial. They can also access hedge funds like Avenue Capital Group and real estate PE firm Harbor Group International. Yieldstreet also plans to launch a venture capital platform that will let customers invest in early stage private companies.
There is one catch. Most of Yieldstreet’s investments are for accredited investors. The start-up provides a prism fund, a fixed-income portfolio spread across multiple asset classes, that non-accredited investors can access.
“We are laser-focused and ambitious about bringing more alternative investment options to investors hungry for yield,” said Milind Mehere, Yieldstreet founder and CEO, who attended the Money20/20 conference.
Yieldstreet has raised $150 million in funding, including a $100 million C round in June. The fintech’s valuation with the recent funding made it “nearly a unicorn,” a person familiar with the situation said.
The start-up is considering expanding into Bitcoin and may have a cryptocurrency fund available soon, the person said. But Yieldstreet has its sights set on an IPO that will take place in the future, people said.
Credit Sesame, which helps users improve their credit, is also planning to tap the public markets.
“We are aiming for a 2022 IPO,” said Adrian Nazari, Credit Sesame’s founder and CEO.
Started in 2010, Credit Sesame is known for helping consumers check and build their credit. It provides information to users on the best credit cards, the most suitable auto and home loans, and even helps consumers pick insurance. After using Credit Sesame, 27% of consumers improved their credit score by more than 10 points in the first month, Nazari said. Another 50% saw their credit score jump by over 10 points in the first six months while 20% saw their score increase by 50 points during the first six months, he said.
The start-up is now targeting the 44 million U.S. consumers that aren’t part of the credit system, Nazari said. With its buy of Canadian challenger bank STACK in 2020, Credit Sesame currently offers free online banking to help customers build their credit when they spend money from their account, Nazari said. The fintech even gives users cash when they boost their credit. “ Our Sesame Cash offering is the first smart digital bank account that helps consumers grow their cash and credit at the same time. It’s a new path to financial stability,” he said.
The Mountain View, California company has long been compared with Credit Karma which was sold to Intuit (INTU) for $8.1 billion in 2020. With its acquisition of STACK, Credit Sesame is now considered a rival to Chime, a challenger bank, which offers fee-free mobile banking, Nazari said. “The goal is not to be a challenger bank. The goal is launching credit building banking,” Nazari told Barron’s from the sidelines of Money20/20.
Credit Sesame has raised roughly $170 million in funding and is operationally profitable, he said. It employs more than 200 people. The fintech hasn’t decided which method, a traditional IPO or merging with a special purpose acquisition company, or SPAC, it will use to go public. “Not a week goes by that SPACs don’t contact us,” Nazari said. “We just want to build a bigger business,” he said.
Write to Luisa Beltran at luisa.beltran@dowjones.com
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