Nubank, the Brazilian financial technology company backed by Warren Buffett and Tencent, has become the most valuable financial group in Latin America with a valuation of about $50bn after its initial public offering.
Shares in the lossmaking digital lender jumped by a quarter when they started trading on Thursday afternoon in New York, after it raised $2.6bn with the sale of a minority stake. The transaction ranks as the fifth-largest US stock market flotation of 2021, according to Dealogic.
David Vélez, founder and chief executive, said the proceeds would help fuel growth in its newest markets of Mexico and Colombia as it seeks to become a pan-Latin American lender.
“There is a lot of opportunity to build the next generation of financial services, so we will continue to invest and grow for a very long time,” he told the Financial Times.
Nubank’s initial market capitalisation of $41.5bn will be higher than Brazil’s biggest traditional bank, Itaú Unibanco, making the start-up founded in 2013 the continent’s most valuable listed financial institution and one of its 10 largest companies.
The debut on public equity markets by Nu Holdings, the Cayman Islands controlling entity behind the share issuance, represents another significant milestone for the region’s booming start-up scene.
Japanese technology conglomerate SoftBank was among the new backers that invested in the float.
Initially offering credit cards with no annual fees, the São Paulo-based group has amassed more than 48m users of its mobile app-based services.
Today, it offers savings accounts, business loans, insurance and investment products across three countries in a region where tens of millions of people have traditionally been excluded from mainstream financial offerings.
The $9-per-share offer price was at the top of Nubank’s final target range, a deal that will offer some reassurance to investors after a slowdown in the IPO market in recent weeks. The fintech last week cut back an original pricing bracket of $10-$11.
The company’s share price jumped to a high of over $12 per share as trading began on Thursday, before easing back to about $10.50.
The year 2021 has been record breaking for listings in the US, but the environment soured in the past few weeks as global stock markets were roiled by uncertainty over the Omicron coronavirus variant and tighter monetary policy.
Vélez said Nubank had been exposed to more market risk because it conducted a dual listing process. The company also sold Brazilian depositary receipts on São Paulo’s B3 bourse, each worth one-sixth of a share, which required an earlier target price announcement.
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“From an investor perspective it would have made sense to just do a US listing,” said Vélez, but he added that it would have felt like “a slap in the face to [Brazilian] customers who always wanted to participate”.
Nubank’s revenues doubled year on year to $1.1bn in the first nine months of 2021, but net losses also widened from $64.4m to $99.1m.
Vélez said the company’s core Brazilian business was already profitable but declined to name a target date for the wider group to break even, saying it would “continue to reinvest in growth as long as profitable growth is available to us”.
The Colombia-born chief said there were no current plans to enter more countries, although Douglas Leone, a partner at US venture capital firm Sequoia and a member of Nubank’s board, said the bank would eventually look to expand outside of Latin America.