David Vélez - Founder & CEO of Nubank
David Vélez, Founder & CEO of Nubank. | Nubank

Brazil’s Nubank raises $2.6 billion in NYSE IPO

It was a prophetic post back in October.

“First, they ignore you. Then they laugh at you. Then they fight you. Then you win,” read the post by Colombian entrepreneur David Velez two months ago. 

Disenchanted with what he described as a dreadful bank experience in Latin America, Velez founded Nubank in 2013 with the idea of taking on big banks in Brazil and leveraging technology to change how financial products are served in the country radically.

Bloomberg News reported that the company raised $2.6 billion in their U.S. IPO on Wednesday.

The company sold 289 million shares Wednesday for $9 each, according to a statement confirming an earlier report by Bloomberg News.

The heavily tech-oriented digital bank has brought Brazilian banks to reckoning in less than a decade.

With user-friendly interfaces and low-fee products it has profoundly disrupted the way Brazilians relate to financial services. It has also threatened banks’ historical dominance.

From setting up shop in a small house in Sao Paulo in 2013, Nubank has grown inch by inch over the past years to become one of the world’s digital banks with the most extensive user base. Its success has enticed high-profile investors such as Warren Buffet’s Berkshire Hathaway. 

It recently reported over 48 million clients, and almost a decade after receiving seed capital to launch its business, Velez is now testing waters once again. 

This time, only that in U.S. stock markets, no more, no less. 

Listed on NYSE

The company has its stock listed at the New York Stock Exchange under the ticker Nu, mirroring other listings by major Brazilian fintech companies outside of Brazil.

“It could be a defining moment for the fintech environment,” said Rafael Schiozer, a professor with Getulio Vargas Foundation in Brazil. “Nubank is the flagship of fintechs in Brazil.”

A fruitful performance will likely encourage an ecosystem looking to take competition one step further, and it could open doors for fintechs looking to explore equity issuances abroad. 

“All the emerging fintech companies in the region will undoubtedly take advantage of the positive effect of this placement,” Jorge Gonzalez Gasque, a managing partner in Mexico with private equity firm G2 Momentum Capital, said. “I think we will see many more cases in the next few years.”

The Brazilian digital lender is looking to sell 289.2 million shares at a price bracket of $8 and $9 apiece, potentially attaining a valuation of roughly $40 billion. However, the company has cut its pricing pretense from an earlier range of $10 to $11.

The company decided to lower the range as global stock investors grew concerned about the omicron variant.

But even at a $40 billion market valuation, the company would still earn its place as Latin America’s most valuable bank. It would rank over prominent and well-established banking corporations.

“If Nubank achieves a $40 billion market capitalization, it will be an important price reference since it will be valued above Itaú and Bradesco, which are traditional banks in Brazil,” Gonzalez Gasque said. “It would show that there is a roadmap for fintechs creating value for investors.” 

More than 48 million customers

The bank reported 48.1 million customers in the region distributed in Brazil, Colombia, and Mexico. The neobank offers digital accounts and international credit cards with little or no fees, among other products such as investments and insurance. Its client base has grown massively over the past few years.

“They have a very good business model, and they have been able to grow in the number of clients in a fantastic fashion,” Schiozer said. “They just kept on growing, which is hard to do for startups.”

The company, however, has yet to turn a profit. It reported a $100 million loss for the first three quarters.

“The challenge right now is to transform growth in credit cards and client base into profit,” Schiozer said. 

Nubank is looking to sell shares in the Brazilian stock exchange through the issuance of receipts. It is no longer positioning itself as a Brazilian company alone but instead looking to forge a regional brand.

“The mission to democratize financial services has always gone far beyond geographic boundaries,” the bank said in a post. “It made sense thus that the IPO should also be global.”