Brazil's Nubank slashes IPO valuation target to about US$40 bil

Brazil's Nubank slashes IPO valuation target to about US$40 bil
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SAO PAULO/BENGALURU (Nov 30): Brazilian digital bank Nu Holdings slashed the targeted price range for its US stock market flotation by about 18% on Tuesday, as a recent global selloff in technology stocks weighs on year-end initial public offerings.

The company, known as Nubank, had earlier aimed for an IPO valuation of more than US$50 billion on the back of a record-breaking boom in US capital markets.

But a recent rise in Treasury yields has dampened investor sentiment towards major tech stocks, while the new coronavirus variant Omicron has raised fears of fresh damage from the more than a year-long pandemic.

In an amended filing with the US securities regulator, Sao Paulo-based Nubank said it now planned to sell about 289.2 million shares priced between US$8 and US$9 each. At the top end of the range, it will raise US$2.6 billion at a valuation of US$41.5 billion.

Affiliates of Sequoia Capital, Tiger Global Management, SoftBank Latin America Funds, Dragoneer Investments, TCV, Sands Capital, Morgan Stanley and JPMorgan are expected to anchor the IPO and buy shares worth at least US$1.3 billion, Nubank said.

Backed by Warren Buffett's Berkshire Hathaway Inc, the company had earlier planned to raise nearly US$3 billion by selling shares priced between US$10 and US$11 apiece.

Even at the lowered target valuation, Nubank would be worth more than Brazil’s largest traditional lender Itau Unibanco Holding SA, which has a market capitalisation of US$37.5 billion.

The digital bank's planned stock market float comes on the heels of several big IPOs in 2021, including those of Rivian Automative, Didi Global Inc and Coupang Inc and other fintech heavyweights like Robinhood Markets Inc and Coinbase Inc.

US IPOs have raised a record haul of US$275 billion this year from investors, according to data from Dealogic.

Investors have, however, been wary of backing Latin American fintech companies with questionable business models after Brazilian payments firm StoneCo posted hefty losses in its most recent quarterly results. StoneCo shares have declined more than 80% this year.

Nubank was founded in 2013 by David Velez, a Stanford-educated Colombian, as an issuer of credit cards that charged no annual fee. The bank has since gained over 48 million customers and launched products including checking accounts and loans.

Nubank primarily makes money through fees that are paid by merchants whenever a customer makes a transaction. The company said last month that it had managed to turn a profit in the first half of 2021 in its Brazilian operations.

Morgan Stanley, Goldman Sachs, Citigroup and NuInvest are the lead underwriters for Nubank's offering.