Brazil’s Nubank makes its debut on Wall Street ready to revolutionize banking

RIO DE JANEIRO, BRAZIL – Brazil’s Nubank debuts this Thursday (9) on Wall Street to consolidate itself as one of the largest digital banks in the world and reach a market value of up to US$41 billion, a forecast somewhat “exaggerated” in the opinion of financial specialists.

With almost 50 million clients spread between Brazil, Colombia, and Mexico, the “fintech” founded in 2013 intends to continue its rapid growth process with an initial stock offering (IPO) on the mecca of the global financial market, the New York Stock Exchange.

As confirmed by company sources, one day later, it will begin its listing on the Sao Paulo stock exchange, the largest in Latin America, using Brazilian depository receipts (BDRs), each of which will be equivalent to one-sixth of a Class A common share traded on Wall Street.

DEBATE ON EXPECTATIONS

Expectations are high, even more so after all the debate generated around the bank’s expectations regarding the exit price.

Initially, Nubank projected that its papers would range between US$10 and US$11, but on November 30, it lowered its expectations by 20% to between US$8 and US$9.

According to the company, this readjustment was made to be “more in line with current financial market conditions”. This Wednesday, the price will be defined on the eve of its debut on the stock exchange.

Even so, the figure is “exaggerated” for Rafael Schiozer, professor of finance at the Getulio Vargas Foundation (FGV), who suspects that the reduction may have been because “demand was not so great.”

If Nubank does manage to remain at the expected levels, it will reach a market value of between US$36.8 billion and US$41 billion.

In the worst-case scenario, it would obtain almost the same valuation as Itaú, Brazil’s largest private bank, something that would not make “any sense” for Schiozer, since Itaú is an established entity with a history of good results.

Rodrigo Crespi, the market specialist at Guide Investimentos, also thinks it is a “rather stretched” value for a company that does not yet have “interesting results”.

In addition, Nubank expects to raise US$2.8 billion with the initial offering, coordinated by giants such as Morgan Stanley, Goldman Sachs, and HSBC.

The company informed that critical investment funds had guaranteed a minimum demand of US$1.3 billion in shares to secure this first push.

WARREN BUFFETT’S MILLION-DOLLAR INVESTMENT

Nubank was born from the minds of Colombian David Vélez, Brazilian Cristina Junqueira, and American Edward Wible, with a clear mission: to democratize the credit card among the Latin American population.

According to Vélez, almost half of the region’s population still does not have a bank account, and credit card penetration is 21% on average, compared to 70% in the United States.

Nubank currently has operations in Brazil, Mexico, and Colombia, countries that account for 60% of Latin America’s GDP, and intends to continue expanding. Significant investment funds have bet on it.

Last June, the Berkshire Hathaway group, owned by U.S. billionaire Warren Buffett, contributed $500 million to the cause. With this, the fintech brought to US$1.15 billion the amount raised in the various investment rounds carried out that month.

Also, in June, it added Anitta, Brazil’s pop queen and a successful entrepreneur, to its Board of Directors in a bid to further boost the brand among the young population.

THE UNFINISHED BUSINESS: PROFIT

Despite customer and revenue growth, the bank posted losses of US$99.1 million in the first nine months of 2021. In 2020, 2019, and 2018 it repeatedly suffered losses of US$171.5 million, US$92.5 million, and US$28.6 million, respectively.

In the third quarter of 2021, it added two million new customers per month in Brazil, Mexico, and Colombia.

The IPO is designed to capitalize the company for it to continue growing and, in Crespi’s opinion, the fact of going public in dollars may indicate that Nubank has “aspirations to go beyond Latin America”.